Asian stocks saw a cautious, low-key start to the week with investors worried about stubbornly high interest rates and China’s continuing economic woes.
On what was a thin day of trading across the region, with markets in Hong Kong, mainland China and Seoul closed for holidays, there was some good news after a last-minute deal averted a US government shutdown.
The US Congress late on Saturday passed a stopgap funding bill with overwhelming Democratic support in a bid to avoid the federal government’s fourth partial shutdown in a decade.
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Japan’s Nikkei share average, though, erased earlier gains to end lower as investors sold their stocks amid worries about global borrowing rates.
The Nikkei index fell 0.31% to close at 31,759.88, after jumping as much as 1.7% earlier in the session. The broader Topix changed course to end 0.39% lower at 2,314.44.
Japanese government bond yields across the curve kept rising on Monday, with 10-year bond yields hitting a fresh high since September 2013. That prompted the BOJ to announce additional bond buying.
Chip-making equipment maker Tokyo Electron fell 1.27% to drag the Nikkei the most. Technology start-up investor SoftBank Group lost 1.34%.
The banking index jumped 1.24% to become the top performer among the 33 industry sub-indexes on the Tokyo Stock Exchange.
Elsewhere across the region, in earlier trade, Singapore, Sydney, Wellington, Kuala Lumpur and Manila were in the red while Taipei, Jakarta and Bangkok saw gains. India was also closed for a holiday.
Yen in Dollar’s Shadow
Bond and foreign exchange trade remains driven by an anticipation of US interest rates staying high and selling in Japanese bonds on Monday drew a central bank response.
Benchmark 10-year Japanese government bond yields rose by a basis point to their highest for a decade at 0.775%. The Bank of Japan said it would buy bonds with 5-10 years to maturity on Wednesday, with the size of purchases to be announced then. Futures bounced on the news.
In the Treasury market 10-year yields rose 4 bps to 4.6124% and the two-year yield rose 3.7 bps to $5.0832%.
The dollar stood tall in currency markets, though it stopped short of last week’s milestone highs except against the yen, where it hit its highest since last October at 149.74 yen.
“Relative US growth resilience and [a] hawkish Fed are factors that continue to underpin support for the dollar, until US 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 fell 0.5% to $0.6400 and the kiwi slipped 0.2% to $0.5986. The euro was a touch weaker at $1.0564.
Crude oil steadied after late-week falls. Brent December crude futures rose 16 cents, or 0.2%, to $92.36 a barrel. US West Texas Intermediate crude futures gained 20 cents, or 0.1%, to $90.99 a barrel.
Key figures
Tokyo – Nikkei 225 < DOWN 0.31% at 31,759.88 (close)
Hong Kong – Hang Seng Index <> CLOSED
Shanghai – Composite <> CLOSED
London – FTSE 100 > UP 0.04% at 7,611.24 (0932 BST)
New York – Dow < DOWN 0.47% at 33,507.50 (Friday close)
- Reuters with additional editing by Sean O’Meara
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