(Bloomberg) -- Japanese stocks gained Tuesday after the yen’s retreat boosted technology companies and automakers.
The Nikkei 225 index gained as much as 1.9%, a day after the benchmark slumped almost 5% following the ruling party’s leadership race. A gauge of Asian equities also advanced while Australian shares slipped. Markets in China and Hong Kong are shut for holidays. US equity futures dipped in early trading after the S&P 500 rose 0.4% Monday.
The yen weakened slightly against the dollar on Tuesday after Federal Reserve Chair Jerome Powell said the central bank will lower interest rates “over time,”while re-emphasizing that the overall economy remains on solid footing.
In Japan, traders are seeking to shrug off weeks of political insecurity, with Shigeru Ishiba’s victory over Sanae Takaichi wrong-footing investors betting on more monetary stimulus from his rival. A call by the new leader for a national election in a bid to consolidate his rise was broadly welcomed. Ishiba is set to be confirmed as Japan’s new prime minister on Tuesday.
Japan’s large manufacturers confidence held steady at 13 in September, according to the Bank of Japan’s quarterly Tankan report out on Tuesday beating economists expectations. Banking stocks advanced after the data came out. BOJ governor Kazuo Ueda has been consistent that if the economy improves, the central bank will continue to normalize rates, said Kieran Calder head of Asia Equity Research at Union Bancaire Privee.
“Improving tankan and political support from Ishiba are helpful in that regard,” Calder said. “So the combination of improving economy and higher rates are both good for banks.”
Markets were also bracing for any impact from news that Israel had begun “targeted ground raids” in Lebanon. Oil steadied at the start of the fourth quarter after a choppy Monday as investors assessed the risks of a wider conflict in the Middle East.
In the US, the S&P 500 secured its fourth-consecutive quarter of gains — the longest such winning stretch since 2021. The tech-heavy Nasdaq 100 notched a similar run.
“The bull market has survived the year’s historically weakest quarter, the third quarter, and it is likely to remain intact through at least the end of the year, as earnings remain strong, interest rates are moving lower and consumers are still spending,” said Emily Bowersock Hill at Bowersock Capital Partners.
“We expect the fourth quarter to be quite similar to the third quarter - elevated volatility, but with a strong finish,” she added.
US bond yields were higher, led by the policy-sensitive two-year note which traded around 3.64% after Powell said the US didn’t have the data yet to make a call on the November meeting.
Still, Treasury debt returned 1.4% this month this month through Friday, as measured by the Bloomberg US Treasury Total Return Index. If the advance holds it will be the market’s longest streak of monthly gains since 2010.
Powell was “a tiny bit hawkish at the margin, but the Fed still has a lot of cutting to do,” according to Vital Knowledge’s Adam Crisafulli. The Fed Chair’s remarks seemed to suggest markets should think about a half-point cut instead of three-quarters of a point for the rest of the year, he added.
In other news, Warren Buffett’s Berkshire Hathaway Inc. is planning its second yen bonds sale this year in the global markets, raising speculation it is looking to boost investments in Japan.
Key events this week:
- Atlanta Fed President Raphael Bostic, Fed Governor Lisa Cook, Richmond Fed President Thomas Barkin and Boston Fed President Susan Collins attend conference on Tuesday
- ECB policy makers speaking include Olli Rehn, Luis de Guindos, Isabel Schnabel and Joachim Nagel on Tuesday
- BOE chief economist Huw Pill speaks Tuesday
- South Korea CPI, S&P Global Manufacturing PMI on Wednesday
- Fed speakers include Richmond’s Thomas Barkin, Cleveland’s Beth Hammack, St. Louis’s Alberto Musalem and Fed Governor Michelle Bowman on Wednesday
- US nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were unchanged as of 10:11 a.m. Tokyo time
- Nasdaq 100 futures rose 0.1%
- Japan’s Topix rose 1.3%
- Australia’s S&P/ASX 200 fell 0.6%
- Euro Stoxx 50 futures rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1133
- The Japanese yen fell 0.3% to 144.06 per dollar
- The offshore yuan was little changed at 7.0122 per dollar
Cryptocurrencies
- Bitcoin fell 0.3% to $63,587.38
- Ether rose 0.4% to $2,624.76
Bonds
- The yield on 10-year Treasuries declined one basis point to 3.77%
- Japan’s 10-year yield declined one basis point to 0.845%
- Australia’s 10-year yield declined one basis point to 3.99%
Commodities
- West Texas Intermediate crude rose 0.2% to $68.29 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Jason Scott.
©2024 Bloomberg L.P.
