Yen drops on 2 trillion yen stimulus report; The kiwi dollar and euro both slid 

The yen declined on speculation Japan’s prime minister will press for a stimulus package alongside his expected call for a snap election — sending the nation’s stocks higher. The kiwi and euro both slid as ballot results foreshadowed potentially complex political coalition building.

New Zealand’s vote kicked off what could be weeks of coalition-building talks, helping wipe as much as 1.1 percent off the currency’s value amid disappointment the ruling party failed to get a majority. The euro was modestly weaker against the dollar after Chancellor Angela Merkel won Germany’s election with a smaller share of the vote, with focus on a surprisingly strong result for a far-right party.

South Korea’s currency rose as concerns over North Korean tensions faded, despite fresh rhetorical exchanges with the U.S. over the weekend. A rout in Chinese property developers dragged on Hong Kong stocks, with most markets in the region down.

Japan’s Shinzo Abe speaks later Monday, with a report that he may seek a 2 trillion yen ($18 billion) stimulus package to support the economy. Central banks could offer further direction to markets this week, with both Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi among those scheduled to speak.

Many investors have been advising to trim risk-taking in global portfolios after gains in stock prices pushed global equities to record levels last week. UBS Group AG, the world’s largest wealth manager, on Friday told clients worldwide to take some profit on their stocks as rising values make it more difficult to generate “significant” further gains.

With politics front and center, markets will also be keeping a close eye on any announcement of a Japanese election. Abe will call a general election for Oct. 22, according to three people with knowledge of his ruling coalition’s plans, seeking to take advantage of a recovery in support.

What to watch out for this week:

• Draghi addresses EU lawmakers in Brussels on Monday. Federal Reserve Chair Janet Yellen is in Cleveland on Tuesday. Later in the week, Bank of England Governor Mark Carney speaks alongside Fed Vice Chairman Stanley Fischer.
• European Union chief Brexit negotiator Michel Barnier and U.K. counterpart David Davis begin their next round of negotiations.
• Household spending last month in the U.S. probably posted the smallest gain since February as motor-vehicle sales shifted into a lower gear, economists forecast government figures to show.

Here are the main moves in markets:

Stocks

• Japan’s Topix index advanced 0.4 percent as of 2:20 p.m. Tokyo time. Australia’s S&P/ASX 200 Index was little changed and South Korea’s Kospi index slid 0.5 percent.
• The Hang Seng Index in Hong Kong fell 1.1 percent with Chinese property developers slumping after several cities on the mainland tightened rules on home sales.
• Futures on the S&P 500 were up less than 0.1 percent. The underlying gauge closed up 0.1 percent on Friday, finishing the week with a 0.1 percent gain.
• New Zealand’s S&P/NZX 50 Gross Index rose 0.7 percent.
• The MSCI Asia Pacific Index declined 0.3 percent.

Currencies

• The yen slid 0.3 percent to 112.27 per dollar, kicking the week off on a down note after recording declines over the past two weeks.
• The euro slid 0.1 percent to $1.1934.
• The kiwi dropped about 1 percent to 72.64 U.S. cents.
• The won advanced 0.6 percent to 1,129.41 per dollar.
• The British pound climbed 0.3 percent to $1.3543. It dropped 0.7 percent last week after disappointment at the lack of Brexit details from Prime Minister Theresa May.
• The Bloomberg Dollar Spot Index was little changed. It gained for the past two weeks.

Bonds

• The yield on 10-year Treasuries was at 2.25 percent, up from its low near 2 percent earlier this month.
• Australian 10-year bond yields were steady at 2.80 percent.

Commodities

• West Texas Intermediate crude lost 0.3 percent to $50.53 a barrel.
• Gold lost 0.3 percent to $1,292.72 an ounce.

Source: Bloomberg – Yen, Kiwi Drop as Politics in Focus; Stocks Mixed: Markets Wrap

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