(Bloomberg) — The yen experienced its most significant decline in two months after the Bank of Japan made only minor adjustments to its policy settings, disappointing certain market participants who were anticipating more significant changes. European equity futures also saw a slight decrease.
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Japan’s currency dropped below 150 per dollar once again, while the nation’s stocks rose following the decision, which involved the central bank maintaining its cap on long-term yields at 1% and leaving its negative interest rate unchanged.
European and US stock futures, along with Asian stocks, fell due to a contracted gauge of Chinese manufacturing and ongoing tensions in the Middle East affecting sentiment. On Tuesday, Israel carried out strikes in Lebanon and escalated its ground operations in Gaza, with Prime Minister Benjamin Netanyahu ruling 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,” commented Marvin Chen, an analyst at Bloomberg Intelligence in Hong Kong.
The dollar strengthened against most of its Group-of-10 counterparts, with a Bloomberg index showing a reversal of the currency’s two-day decline. Cash Treasuries slightly increased. The US Treasury reduced its estimate for federal borrowing in the current quarter on Monday, citing stronger-than-expected revenue.
Flexible Approach
The BOJ stated that it will adopt a more flexible approach to controlling yields on 10-year government debt. This marks a departure from its previous commitment to conduct daily bond buying operations at a 1% cap, effectively drawing a line in the sand at that level. The Nikkei had previously reported that the BOJ was considering allowing yields to surpass its 1% cap.
“Dollar-yen appears disappointed by the extent of the tweak,” particularly 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.”
In Asia, oil prices slightly increased after a decline on Monday due to signs that the Israel-Hamas conflict will likely remain contained, coupled with potential softening in demand.
Elsewhere, Samsung Electronics Co. announced that it anticipates the recovery trend in the memory market to gain momentum next year. The company reported third-quarter profits that exceeded expectations.
Key events this week:
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Eurozone CPI, GDP, Tuesday
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US Conference Board consumer confidence, employment cost index, Tuesday
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China Caixin manufacturing PMI, Wednesday
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UK S&P Global / CIPS UK Manufacturing PMI, Wednesday
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US construction spending, ISM Manufacturing, job openings, light vehicle sales, Wednesday
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All Saints holiday in much of Europe, Wednesday
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Treasury quarterly refunding announcement, Wednesday
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Federal Reserve interest rate decision. Fed Chair Jerome Powell holds news conference, Wednesday
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Eurozone S&P Global Eurozone Manufacturing PMI, Thursday
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Bank of England interest rate decision. Governor Andrew Bailey holds news conference, Thursday
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US factory orders, initial jobless claims, productivity, Thursday
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Apple earnings, Thursday
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China Caixin services PMI, Friday
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Eurozone unemployment, Friday
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US unemployment, nonfarm payrolls, Friday
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Canada employment report, Friday
Here are some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.3% as of 6:30 a.m. London time. The S&P 500 rose 1.2%
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Nasdaq 100 futures fell 0.5%. The Nasdaq 100 rose 1.1%
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Europe Stoxx 50 futures were little changed
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Japan’s Topix index rose 1%
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Hong Kong’s Hang Seng Index fell 1.6%
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China’s Shanghai Composite Index fell 0.2%
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Australia’s S&P/ASX 200 Index rose 0.1%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro fell 0.1% to $1.0603
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The Japanese yen fell 0.7% to 150.20 per dollar
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The offshore yuan was little changed at 7.3312 per dollar
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The Australian dollar fell 0.3% to $0.6353
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The British pound fell 0.2% to $1.2147
Cryptocurrencies
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Bitcoin fell 0.5% to $34,282.88
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Ether was little changed at $1,800.63
Bonds
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The yield on 10-year Treasuries declined one basis point to 4.88%
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Japan’s 10-year yield advanced six basis points to 0.950%
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Australia’s 10-year yield advanced five basis points to 4.92%
Commodities
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West Texas Intermediate crude rose 0.7% to $82.86 a barrel
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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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