Japan’s Nikkei climbed 1.7%, before dropping to flat in the mid-afternoon
Asia’s stock markets made a speculative start to the fourth quarter in holiday-thinned trade on Monday, prodding sideways while the dollar held firm and a last-minute deal to prevent a U.S. government shutdown lifted S&P 500 futures.
Markets in India, Hong Kong and China were closed for a holiday.
Japan’s Nikkei climbed 1.7%, before dropping to flat in the mid-afternoon. The yen dropped to within a whisker of 150-per-dollar and its weakness is a boost for exporters’ and the pricing of their foreign earnings in yen.
An eleventh-hour deal to avert a U.S. government shutdown, struck over the weekend, also helped the mood and raised U.S. stock futures by 0.5% in Asia. The weekend’s stopgap funding bill permitted the government to keep operating through November 17, and means key data releases including Friday’s monthly payrolls report can go ahead on time.
The shutdown risks are only delayed, not eliminated, TD Securities strategists stated in a client note.
A sense of reduced uncertainty is likely to drive a small relief in markets, but market volatility is likely to stay higher as investors await the next catalyst, which is likely to be top-tier data, they added.
Japanese stocks were also strengthened by the BoJ’s quarterly Tankan survey, which showed an improvement in business sentiment. MSCI’s broadest index of Asia-Pacific shares outside Japan was flat.
Bond and forex trade remain driven by an expectation of U.S. interest rates staying high and selling in Japanese bonds on Monday drew a central bank response.
Benchmark 10-year Japanese government bond yields increased by a basis point to their highest for a decade at 0.775%. The BoJ said it would buy bonds with 5-10 years to maturity on Wednesday, with the size of purchases to be announced then. Futures jumped on the news.
In the Treasury market 10-year yields increased 4 basis points to 4.6124% and the two-year yield increased 3.7 basis points to $5.0832%.
The dollar was firm in currency markets, though it fell short of last week’s benchmark highs save for against the yen , where it hit its highest since last October at 149.74 yen.
Relative U.S. growth resilience and (a) hawkish Fed are factors that continue to underpin support for the dollar, until U.S. data starts to show more material signs of softening, said OCBC currency strategist Christopher Wong.
Mixed China factory surveys and an expectation of no changes to rates settings at central bank meetings in the coming days kept pressure on the Australian and New Zealand dollars.
The Aussie dropped 0.5% to $0.6400 and the kiwi slid 0.2% to $0.5986.
Crude oil steadied after late-week declines.
Brent December crude futures gained 16 cents, or 0.2%, to $92.36 a barrel. U.S. West Texas Intermediate (WTI) crude futures added 20 cents, or 0.1%, to $90.99 a barrel.
