Yen Rebounds as Most Asia Stocks Drop With Oil Before ECB
Japan’s yen rebounded from a one-month low while Euro Stoxx 50 Index futures were little changed before a European Central Bank monetary-policy announcement. Most Asian stocks retreated with oil, and platinum dropped amid talks to end a South African miners’ strike.
The yen gained 0.2 percent to 102.54 versus the dollar at 7:10 a.m. in London, while the euro traded near its lowest since February. Five stocks fell for every four that rose on the MSCI Asia Pacific Index (MXAP) while futures on the Standard & Poor’s 500 Index fluctuated with contracts on Germany’s DAX index. Oil in New York lost 0.2 percent and platinum declined 0.7 percent.
The ECB may become the first major central bank to take rates negative today as President Mario Draghi seeks to ward off deflation after data showed growth in the 18-nation region slowed in the first quarter. U.S. initial jobless claims increased last week and the unemployment rate rose in May, data today and tomorrow will show, after service industries expanded at the fastest pace in nine months in May. A gauge of China’s non-manufacturing sector fell in May, HSBC Holdings Plc said.
“We’re seeing demand for the yen as a haven ahead of the ECB decision,” said Desmond Chua, a strategist at CMC Markets in Singapore. “There’s a lot of risk surrounding the meeting, with investors split over the extent of additional easing, and whether or not Draghi will disappoint. If we don’t see the full suite of easing expectations fulfilled, we may get a dead cat bounce in euro.”
ECB Outlook
The yen weakened the previous three days amid signs of improvement in the U.S. economy and as speculation mounted that European policy makers will increase economic stimulus. The euro traded at $1.3607, after falling toward a May 29 intraday bottom of $1.3586 that was the lowest level since Feb. 13.
Draghi will probably signal after the ECB meeting that any rate cuts won’t be the last and may reiterate his commitment to keeping borrowing costs at current or lower levels, two euro-region central bank officials said, asking not to be identified because the policy discussions aren’t public. Data this week showed economic growth in the first quarter dropped to 0.2 percent, while inflation slowed in May more than analysts predicted.
The ECB’s deposit facility rate will be reduced to negative 0.1 percent today, according to the median of 50 economists estimates compiled by Bloomberg. The main refinancing rate will probably be cut to 0.1 percent from 0.25 percent, while the marginal lending facility rate may fall to 0.6 percent, surveys show.
ECB Uncertainty
“No one wants to bravely put on a large position ahead of the ECB decision today,” Tony Farnham, a Sydney-based strategist at Patersons Securities Ltd., said in a phone interview, referring to the Federal Reserve. “The U.S. economy isn’t shooting the lights out but growth in the second half will be decent enough to justify the Fed winding back the quantitative easing.”
The MSCI Asia-Pacific gauge traded at 142.79, less than 0.5 point from a seven-month closing high of 143.07 on June 3. Hong Kong’s Hang Seng Index declined as much as 0.4 percent, while a gauge of Chinese shares in the city swung to a 0.1 percent gain.
Japan’s Topix index erased gains to fall 0.1 percent as the yen rallied. The country’s broadest equity measure capped 10 straight daily advances yesterday, the longest such streak since August 2009.
South Korea’s Kospi index dropped 0.7 percent as trade resumed after a holiday. LG Household & Health Care Ltd. plunged 12 percent, the biggest loss on the Asia-Pacific gauge, after the cosmetics maker’s vice-chairman sold 22,000 of the 32,000 shares he owned. South Korea’s government bonds fell, sending the 10-year yield to a two-week high of 3.40 percent.
Miners’ Strike
Platinum slipped to $1,427.38 an ounce, within 1 percent of erasing its advance this quarter. Producers crippled by a four-month strike in South Africa asked for time to consider a pay proposal from the union before government-brokered talks resume today. The strike by more than 70,000 Association of Mineworkers and Construction Union members at Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc, the world’s three leading producers, has disrupted their mines since Jan. 23.
The Philippine peso reversed losses, rising 0.2 percent to 43.79 per dollar, as the fastest inflation since 2011 fueled speculation interest rates will be raised. Consumer-price gains quickened to 4.5 percent in May from 4.1 percent the previous month. Economists expected 4.2 percent, based on the median estimate of economists surveyed by Bloomberg.
China’s benchmark money-market rate fell to the lowest level in almost a month as the central bank’s money-market operation added a net 73 billion yuan ($11.7 billion) to the banking system this week. The seven-day repurchase rate fell eight basis points to 3.07 percent in Shanghai.
Source: businessweek
