Asian shares extend global rout, yen rises on intervention hints

An electronic IPO board is displayed inside a conference hall in Tokyo, Japan November 1, 2021. REUTERS/Issei Kato

SYDNEY, Sept 14 (Reuters) – Asian shares fell on Wednesday as U.S. data dashed hopes of an immediate pick-up in inflation, although the dollar halted its relentless run against the yen as Japan gave its strongest signal yet were unhappy with the currency’s sharp fall . .

Data on Tuesday showed the headline US consumer price index rose 0.1% on a monthly basis, against expectations for a 0.1% decline. In particular, core inflation, which strips out volatile food and energy prices, doubled to 0.6%. read more

Wall Street saw its steepest drop in two years, the safe-haven dollar had its biggest jump since early 2020 and two-year Treasury yields, which are rising on traders’ expectations of higher Fed funds rates, jumped to their highest level in 15 years.

The stock rout is set to hit European markets, with pan-region Euro Stoxx 50 futures, German DAX futures and FTSE futures up more than 0.7%.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 2.2% on Wednesday, dragged down by a 2.4% drop in resource-heavy Australia (.AXJO), a 2.5% drop in Hong Kong’s Hang Seng Index (.HSI) and a 1.5% drop in Chinese bluechips (.CSI300).

Japan’s Nikkei (.N225) fell 2.6%.

After heavy overnight stock selling, both S&P 500 futures and Nasdaq futures rose 0.2%.

“Markets have reacted wildly to what I would consider a modest miss in US CPI,” said Scott Rundell, chief investment officer at Mutual Limited.

“The future has stabilized so we might see a dead cat bounce tonight.”

Financial markets have now fully priced in a rate hike of at least 75 basis points at the conclusion of the Fed’s policy meeting next week, with a 38% probability of a super-sized, full percentage point increase to the Fed Funds target. rate, according to CME’s FedWatch tool.

A day earlier, the probability of a rise of 100 bps was zero.

“USD rates are now pricing in a Fed Funds rate of 4.25% by the end of 2022 (75bps, 75bps, 25bps for the remaining three meetings). Decent odds for a peak of 4.5% in early 2023 are also reflected, ” said Eugene Leow, senior rate strategist at Deutsche Bank.

“While robust growth and easing inflation may provide a better risk-taking environment, the US economy now looks overheated. With no clear signs of the labor market easing and inflation still problematic, Fed tapering looks set to be delayed again. .”

The strength of the US dollar had pushed the price-sensitive Japanese yen near a 24-year low of 149.96 yen before giving up some of the gains on news that the Bank of Japan has carried out a rate check in apparent preparation for currency intervention. read more

Yen-buying intervention is rare. The last time Japan intervened to support its currency was in 1998, when the Asian financial crisis triggered a sell-off of the yen and rapid capital outflows.

Earlier in the day, Japanese Finance Minister Shunichi Suzuki said currency intervention was among the options the government would consider. read more

The dollar was now trading at 143.7 yen, down 0.6% for the day.

Many traders remained skeptical that intervention was imminent, but the jump in the yen pointed to rising nerves. The timing of the BOJ’s move also suggests that 145 per dollar will be an important level for markets and authorities.

The two-year US Treasury yield scaled to a fresh 15-year high of 3.8040% on Friday before retreating to 3.7629%, and the gap with the benchmark 10-year yield widened to around 34 basis points, compared with just 16 basis points a. week ago.

The inversion of the yield curve is usually treated as a warning of recession.

The 10-year government bond yield remained stable at 3.4178%.

Oil prices fell on Friday. US crude fell 0.6% to $86.82 a barrel, and Brent fell by a similar margin to $92.65.

Gold was slightly higher. Spot gold traded at $1,703.02 per ounce.

Reporting by Stella Qiu; Editing by Stephen Coates, Ana Nicolaci da Costa and Sam Holmes

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