Asian shares, yen weather Japan uncertainty as earnings loom
SYDNEY : Asian shares and the yen held their ground on Monday as Japanese elections proved bad for the government but no worse than already priced in, while Wall Street futures braced for earnings from the first of the tech giants.
Investors were also hoping for some progress in trade talks ahead of President Donald Trump's Aug 1 tariff deadline, with US commerce secretary Howard Lutnick still confident a deal could be reached with the European Union.
There were reports Trump and Chinese leader Xi Jinping were closer to arranging a meeting, though likely not until October at the earliest.
In Japan, the ruling coalition lost control of the upper house in an election on Sunday, further weakening Prime Minister Shigeru Ishiba's grip on power as a tariff deadline looms.
Ishiba expressed his intention to stay in the position, which along with a market holiday, limited the reaction and the yen was 0.4% firmer at 148.29 to the dollar.
'Ishiba will try to govern with support from some within the opposition, but this likely means a looser fiscal policy and is not good news for bond yields,' said Rodrigo Catril, a senior FX strategist at NAB.
'History also suggests that domestic political uncertainty tends to keep the BOJ on the side-lines, so the prospect of rate hikes is now set to be delayed for a little bit longer.'
The Bank of Japan still has a bias to raise rates further but markets are pricing little chance of a move until the end of October.
While the Nikkei was shut, futures traded up at 39,875 and just above the cash close of 39,819.
MSCI's broadest index of Asia-Pacific shares outside Japan was flat, while South Korean stocks added 0.4%.
Mega caps kick off
S&P 500 futures and Nasdaq futures both edged up 0.1%, and are already at record highs in anticipation of more solid earnings reports.
A host of companies reporting this week include Alphabet and Tesla , along with.
Investors also expect upbeat news for defence groups RTX, Lockheed Martin and General Dynamics. Ramped up government spending across the globe has seen the S&P 500 aerospace and defence sector rise 30% this year.
In bond markets, US Treasury futures held steady having dipped late last week after Federal Reserve governor Christopher Waller repeated his call for a rate cut this month.
Most of his colleagues, including chair Jerome Powell, have argued a pause is warranted to judge the true inflationary impact of tariffs and markets imply almost no chance of a move in July. A September cut is put at 61%, rising to 80% for October.
Powell's reticence on rates has drawn the ire of Trump who threatened to fire the Fed chief, before backing down. The spectre of a potential political appointee who would seek to ease policy sharply has investors on edge.
The European Central Bank meets this week and is expected to hold its rates steady at 2.0% following a string of cuts.
'The press conference will likely keep highlighting uncertainty and need to wait for tariff negotiations to conclude before deciding the next step,' said analysts at TD Securities in a note. 'Similarly, its 'meeting-by-meeting' language would be retained in the release.'
The euro was unchanged at US$1.1630 in early trading, having dipped 0.5% last week and away from its recent near-four-year top of US$1.1830. The dollar index was a fraction lower at 98.40.
In commodity markets, gold was little changed at US$3,348 an ounce with all the recent action in platinum which last week hit its highest since August 2014.
Oil prices were caught between the prospect of increased supply from Opec+ and the risk European Union sanctions against Russia for its war in Ukraine could curb its exports.
Brent edged up 0.1% to US$69.36 a barrel, while US crude added 0.1% to US$67.39 per barrel.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
11 minutes ago
- The Star
Asia shares slip as investors remember the drag of tariffs
SYDNEY: Asia shares eased on Tuesday while the euro nursed its losses as investors pondered the downside of the U.S.-EU trade deal and the reality that punishing tariffs were here to stay, with unwelcome implications for growth and inflation. The initial relief over Europe's 15% levy quickly soured when set against the 1% to 2% that stood before President Donald Trump took office. Leaders in France and Germany lamented the outcome as a drag on growth, pulling down stocks and bond yields across the continent while slugging the single currency. Trump also flagged a "world tariff" rate of 15% to 20% on all trading partners that were not negotiating a deal, among the highest rates since the Great Depression of the 1930s. "While the worst case scenario was averted, the implied EU tariff increase from 1% in January is a significant tax increase on EU exports," wrote economists from JPMorgan in a note. "This is a very big shock that unwinds a century of U.S. leadership in global free trade," they warned. "While we no longer see a U.S. recession as our baseline from this shock, the risk is still elevated at 40%." A further risk to world growth came from a sudden spike in oil prices after Trump threatened a new deadline of 10 or 12 days for Russia to make progress toward ending the war in Ukraine or face tougher sanctions on oil exports. Brent edged up 0.1% to $70.10 a barrel, having climbed 2.3% on Monday, while U.S. crude held at $66.73. The air of caution saw MSCI's broadest index of Asia-Pacific shares outside Japan slip 0.7%. Japan's Nikkei eased 0.8%, while Chinese blue chips fell 0.1%. European shares steadied after Monday's sell-off. EUROSTOXX 50 futures edged up 0.2%, while FTSE futures and DAX futures both added 0.1%. The euro was flat at $1.1592, after falling 1.3% overnight in the largest drop since mid-May. It now has chart support at $1.1556. The dollar index was up at 98.674, after the rush out of short dollar positions lifted it 1% overnight, while it touched a one-week high on the yen at 148.63. Wall Street held firm on hopes for upbeat results from mega caps this week that include Apple, Microsoft and Amazon. S&P 500 futures nudged up 0.1%, while Nasdaq futures added 0.2%. Yields on 10-year Treasuries held at 4.408% having crept higher on Monday as markets braced for another steady decision on interest rates from the Federal Reserve. Futures imply a 97% chance the Fed will keep rates at 4.25%-4.5% at its meeting on Wednesday and reiterate concerns that tariffs will push inflation higher in the short term. Analysts also assume one, or maybe two, Fed officials will dissent in favour of a cut and supporting wagers for a move in September. The odds could change depending on a slew of U.S. data this week including gross domestic product for the second quarter where growth is seen rebounding to an annualised 2.4%, after a 0.5% contraction in the first quarter. Figures on job openings are due later on Tuesday that will help refine forecasts for the crucial payrolls report on Friday. Canada's central bank also meets on Wednesday and again is widely expected to hold rates at 2.75% as it waits to see how trade talks with the U.S. wash out. In commodity markets, prices for copper and iron ore were under pressure while gold idled at $3,316 an ounce. - Reuters
New Straits Times
11 minutes ago
- New Straits Times
Asia shares slip as investors remember the drag of tariffs
SYDNEY: Asia shares eased on Tuesday while the euro nursed its losses as investors pondered the downside of the US-EU trade deal and the reality that punishing tariffs were here to stay, with unwelcome implications for growth and inflation. The initial relief over Europe's 15 per cent levy quickly soured when set against the 1 per cent to 2 per cent that stood before President Donald Trump took office. Leaders in France and Germany lamented the outcome as a drag on growth, pulling down stocks and bond yields across the continent while slugging the single currency. Trump also flagged a "world tariff" rate of 15 per cent to 20 per cent on all trading partners that were not negotiating a deal, among the highest rates since the Great Depression of the 1930s. "While the worst case scenario was averted, the implied EU tariff increase from 1 per cent in January is a significant tax increase on EU exports," wrote economists from JPMorgan in a note. "This is a very big shock that unwinds a century of US leadership in global free trade," they warned. "While we no longer see a US recession as our baseline from this shock, the risk is still elevated at 40 per cent." A further risk to world growth came from a sudden spike in oil prices after Trump threatened a new deadline of 10 or 12 days for Russia to make progress toward ending the war in Ukraine or face tougher sanctions on oil exports. Brent edged up 0.1 per cent to US$70.10 a barrel, having climbed 2.3 per cent on Monday, while US crude held at US$66.73. The air of caution saw MSCI's broadest index of Asia-Pacific shares outside Japan slip 0.7 per cent. Japan's Nikkei eased 0.8 per cent, while Chinese blue chips fell 0.1 per cent. European shares steadied after Monday's sell-off. EUROSTOXX 50 futures edged up 0.2 per cent, while FTSE futures and DAX futures both added 0.1 per cent. The euro was flat at US$1.1592, after falling 1.3 per cent overnight in the largest drop since mid-May. It now has chart support at US$1.1556. The dollar index was up at 98.674, after the rush out of short dollar positions lifted it 1 per cent overnight, while it touched a one-week high on the yen at 148.63. Wall Street held firm on hopes for upbeat results from mega caps this week that include Apple, Microsoft and Amazon. S&P 500 futures nudged up 0.1 per cent, while Nasdaq futures added 0.2 per cent. Yields on 10-year Treasuries held at 4.408 per cent having crept higher on Monday as markets braced for another steady decision on interest rates from the Federal Reserve. Futures imply a 97 per cent chance the Fed will keep rates at 4.25 per cent-4.5 per cent at its meeting on Wednesday and reiterate concerns that tariffs will push inflation higher in the short term. Analysts also assume one, or maybe two, Fed officials will dissent in favour of a cut and supporting wagers for a move in September. The odds could change depending on a slew of US data this week including gross domestic product for the second quarter where growth is seen rebounding to an annualised 2.4 per cent, after a 0.5 per cent contraction in the first quarter. Figures on job openings are due later on Tuesday that will help refine forecasts for the crucial payrolls report on Friday. Canada's central bank also meets on Wednesday and again is widely expected to hold rates at 2.75 per cent as it waits to see how trade talks with the US wash out. In commodity markets, prices for copper and iron ore were under pressure while gold idled at US$3,316 an ounce.
New Straits Times
11 minutes ago
- New Straits Times
Japan's Nikkei extends falls on corporate outlook concerns
TOKYO: Japan's Nikkei share average fell for a third straight session on Tuesday, as concerns over the domestic corporate outlook led investors to lock in profits from a recent rally. The Nikkei was down 0.7 per cent at 40,728.48, as of 0151 GMT. The broader Topix declined 0.75 per cent to 2,908.75. In the middle of the earnings season in Japan, investors are cautious about the corporate outlook, which may be hit by a 15 per cent tariff to be imposed on Japan's exports to the United States, said Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Trust Asset Management. Last week, Japan struck a trade deal that lowers the hefty tariffs U.S. President Donald Trump had threatened to impose on goods from Japan. That sent the Nikkei to its highest level in a year last week, but the gain was too much, said Ueno. "Half of its gains came from expectations that Prime Minister (Shigeru) Ishiba would step down, and the market hoped someone who promotes measures to stimulate the economy would replace him," he said. Ishiba vowed to remain in his post after his ruling coalition suffered a bruising defeat in upper house elections, prompting some in his own party to doubt his leadership as the opposition weighed a no-confidence motion. On Tuesday, chip-related stocks led the decline, with Lasertec falling 5 per cent to become the worst performer on the Nikkei. Tokyo Electron and Advantest slipped 0.49 per cent and 0.33 per cent, respectively. Nitto Denko fell 4.6 per cent after the industrial materials maker posted a 16 per cent decline in quarterly operating profit. All but three of the Tokyo Stock Exchange's 33 industry sub-indexes fell. The auto sector lost 1.7 per cent to become the worst performer. Bucking the trend, Nomura Research jumped 8.9 per cent after the consulting and IT solutions provider reported a 17 per cent rise in quarterly net profit.
