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Investors await US inflation data as Asian, European markets weaken.

24th June 2024

European stock market

Asian and European markets were mixed Monday after last week’s poor run as investors look ahead to the release of key US inflation data, while eyes are on Japan as the yen sits around three-decade lows.

A forecast-topping read on the US services sector provided further evidence that the world’s top economy remained in rude health and dealt a blow to hopes for interest rate cuts.

Asian markets got off to a weak start for the week, with Shanghai, Sydney, Seoul, Taipei and Wellington all in negative territory.

Hong Kong was flat, while Tokyo, Bangkok, Mumbai, Singapore, Manila and Jakarta edged higher.

London, Paris and Frankfurt rose.

Investors are also tracking developments in Japan as the yen struggles against the dollar, leading the country’s top currency official to warn that authorities were ready to step in to provide support.

The Japanese unit is approaching the 160.17 per dollar mark that forced authorities to intervene in currency markets earlier in the year.

The movement led Vice Finance Minister Masato Kanda to say officials were ready to step in 24 hours a day.

“If there are excessive currency fluctuations, it has a negative impact on the national economy,” he said.

“In the event of excessive moves based on speculation, we are prepared to take appropriate action.”

The comments have helped keep the yen below 160 but US rate uncertainty was putting fresh pressure on the unit.

The Japanese central bank’s cautious approach to tightening monetary policy, combined with the Fed keeping interest rates at two-decade highs, is putting pressure on the yen.

“Perhaps if the Bank of Japan got on with things it wouldn’t require direction intervention in the FX markets to prop up the yen — it never works for very long anyway,” said Neil Wilson at Finalto trading group in a commentary.

IG Australia’s Tony Sycamore tipped authorities to step in “after yen triggers buy orders perched above the late April 160.20ish high”.

A surge in the tech sector has helped push markets to record or multi-year highs but concerns that the buying has gone too far have set in and profit-taking has weighed on equities in recent weeks.

    That saw Wall Street end broadly lower Friday, with the better-than-expected read on the US services sector, which is at a more than two-year high, weighing on sentiment.

    The next major indicator will come at the end of this week with the personal consumption expenditures index — the Federal Reserve’s preferred gauge of inflation — which could play a key role in the bank’s plans for monetary policy.

    Decision-makers have pushed back against speculation they could cut interest rates in September, with some even suggesting they are happy to keep them elevated into the new year.

    – Key figures –

    Tokyo – Nikkei 225: UP 0.5 percent at 38,804.65 (close)

    Hong Kong – Hang Seng Index: FLAT at 18,027.71 (close)

    Shanghai – Composite: DOWN 1.2 percent at 2,963.10 (close)

    London – FTSE 100: UP 0.3 percent at 8,263.87

    Dollar/yen: UP at 159.69 yen from 159.61 yen on Friday

    Euro/dollar: UP at $1.0711 from $1.0697

    Euro/pound: UP at 84.64 pence from 84.53 pence

    Pound/dollar: UP at $1.2655 from $1.2651

    West Texas Intermediate: Up 0.2 percent at $80.88 per barrel

    Brent North Sea Crude: UP 0.2 percent at $84.53 per barrel

    New York – Dow: UP 0.1 percent at 39,150.33 (close)

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