Yen Drops on BOJ Tweak, Europe Stock Futures Slip: Markets Wrap

(Bloomberg) — The yen fell the most in two months after the Bank of Japan made only minor changes to its policy settings, disappointing some in the market who had expected more. European equity futures edged lower.

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Japan’s currency dropped back past 150 per dollar, while the nation’s stocks rose following the decision that saw the central bank keeping its cap on long-term yields at 1% and leaving its negative interest rate untouched.

European and US stock futures fell with Asian stocks after a gauge of Chinese manufacturing contracted and tensions in the Middle East weighed on sentiment. Israel struck targets in Lebanon Tuesday and stepped up its ground operations in Gaza as Prime Minister Benjamin Netanyahu ruled out a cease fire.

China’s “October manufacturing PMI falling into contraction territory looks to be disappointing markets and raises some doubts on the strength of the macro recovery,” Marvin Chen, an analyst at Bloomberg Intelligence in Hong Kong.

The dollar strengthened against most its Group-of-10 peers, with a Bloomberg gauge of the US currency snapping a two-day decline. Cash Treasuries edged higher. The US Treasury on Monday reduced its estimate for federal borrowing for the current quarter, citing stronger-than-expected revenue.

Flexible Approach

The BOJ will take a more flexible approach to controlling yields on 10-year government debt, according to its statement. That marks a shift from a previous pledge to conduct daily bond buying operations at 1%, a stance that effectively drew a line in the sand at that level. The Nikkei had earlier reported the BOJ would consider letting yields climb above its 1% cap.

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“Dollar-yen appears disappointed by the extent of the tweak,” especially after the Nikkei report, said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney. “The statement also continues to strike a dovish tone with the BOJ reiterating that it will patiently continue with monetary easing.”

Oil edged higher in Asia after sliding Monday due to signs the Israel-Hamas war so far will remain contained while demand may be softening.

Elsewhere, Samsung Electronics Co. said it expected the recovery trend in the memory market to accelerate next year. The company booked third-quarter profit that beat expectations.

Key events this week:

• Eurozone CPI, GDP, Tuesday

• US Conference Board consumer confidence, employment cost index, Tuesday

• China Caixin manufacturing PMI, Wednesday

• UK S&P Global / CIPS UK Manufacturing PMI, Wednesday

• US construction spending, ISM Manufacturing, job openings, light vehicle sales, Wednesday

• All Saints holiday in much of Europe, Wednesday

• Treasury quarterly refunding announcement, Wednesday

• Federal Reserve interest rate decision. Fed Chair Jerome Powell holds news conference, Wednesday

• Eurozone S&P Global Eurozone Manufacturing PMI, Thursday

• Bank of England interest rate decision. Governor Andrew Bailey holds news conference, Thursday

• US factory orders, initial jobless claims, productivity, Thursday

• Apple earnings, Thursday

• China Caixin services PMI, Friday

• Eurozone unemployment, Friday

• US unemployment, nonfarm payrolls, Friday

• Canada employment report, Friday

Here are some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.3% as of 6:30 a.m. London time. The S&P 500 rose 1.2%

• Nasdaq 100 futures fell 0.5%. The Nasdaq 100 rose 1.1%

• Europe Stoxx 50 futures were little changed

• Japan’s Topix index rose 1%

• Hong Kong’s Hang Seng Index fell 1.6%

• China’s Shanghai Composite Index fell 0.2%

• Australia’s S&P/ASX 200 Index rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.1% to $1.0603

• The Japanese yen fell 0.7% to 150.20 per dollar

• The offshore yuan was little changed at 7.3312 per dollar

• The Australian dollar fell 0.3% to $0.6353

• The British pound fell 0.2% to $1.2147

Cryptocurrencies

• Bitcoin fell 0.5% to $34,282.88

• Ether was little changed at $1,800.63

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.88%

• Japan’s 10-year yield advanced six basis points to 0.950%

• Australia’s 10-year yield advanced five basis points to 4.92%

Commodities

• West Texas Intermediate crude rose 0.7% to $82.86 a barrel

• Spot gold fell 0.1% to $1,993.51 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess, Winnie Hsu and Zhu Lin.

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