BLBG:Yen Strengthens as European Stocks Rise; Silver Gains, Oil Falls
The yen strengthened and Japanese stocks slumped as the nation’s top central banker signaled higher interest rates. European shares rose for the first time in three days, while silver advanced and oil retreated.
The yen climbed 0.3 percent to 101.03 per dollar at 8:17 a.m. in London. Japan’s Topix Index (TPX) declined 3.4 percent, paring its advance this year to 34 percent. The Stoxx Europe 600 Index gained 0.2 percent, while Standard & Poor’s 500 Index futures were little changed. Silver rallied 1.2 percent and crude sank 0.5 percent in New York.
Bank of Japan Governor Haruhiko Kuroda, speaking yesterday, cited an April BOJ report indicating rates could rise between one and three percentage points in an improving economy without causing instability. China won’t sacrifice the environment to ensure short-term growth, President Xi Jinping said on May 24, indicating a tolerance for slower growth. Markets in the U.S. and U.K. are shut today for holidays.
“In Japan, we expect more volatility and with bond yields that low you don’t need a big move to end up with a capital loss,” Keith Poore, the Wellington-based head of investment strategy at AMP Capital, which has about $126 billion in assets under management, said in a phone interview. “We’ve had confirmation from China that the recovery is going to be very shallow by their standards.”
End Deflation
The yen’s gain versus the dollar extends last week’s 1.9 percent advance, the biggest climb since the five days ended June 1, 2012. The yen is still down 17 percent in the past six months versus nine developed-nation counterparts tracked by Bloomberg Correlation-Weighted Indexes, as Prime Minister Shinzo Abe pledged to stem 15 years of deflation. Kuroda, who was speaking in Tokyo, unveiled a plan on April 4 to double money in the economy over two years by ramping up bond purchases.
Yields on Japan’s 10-year government bonds were at 0.830 percent today after reaching 1 percent on May 23, the highest since April last year. The rate completed a three-week gain of 28 1/2 basis points on May 24, the most since April 2008.
“The BOJ dominates asset markets for better or worse,” Bill Gross, co-chief investment officer at Pacific Investment Management Co., said yesterday in a post on Twitter. “Watch JGBs, the yen and the exodus from each.”
Japan’s Topix, which plunged 6.9 percent on May 23, the most since the aftermath of the March 2011 disaster, is trading within half a percentage point from a correction, defined as a 10 percent drop from a recent high.
Weekly Loss
The MSCI Asia Pacific Index slid 1.3 percent, extending its biggest weekly decline in 10 months, led by consumer discretionary companies and utilities. Australia’s S&P/ASX 200 Index slid 0.5 percent. The Philippine Stock Exchange Index tumbled 2.4 percent. Taiwan’s measure gained 0.9 percent.
Toyota Motor Corp. slumped 5 percent in Tokyo, paring an annual rally to 48 percent. Reliance Industries Ltd. (RIL), operator of the world’s largest oil refining complex, headed for its biggest gain in eight months in Mumbai after discovering a new natural gas deposit in its biggest block off India’s east coast.
European and U.S. stocks capped the first weekly loss in more than a month amid speculation the Federal Reserve will reduce its bond purchases.
West Texas Intermediate crude oil for July delivery dropped 0.5 percent to $93.67 a barrel in New York. Prices declined 2 percent last week, the most in more than a month.
The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of the world’s oil supply, will maintain its output quota of 30 million barrels a day when the group meets May 31 in Vienna, according to 19 of 20 traders and analysts surveyed by Bloomberg News.
Cash silver climbed 1.2 percent. Gold rose 0.5 percent to $1,394.15 an ounce. Russia and Kazakhstan expanded gold reserves for the seventh straight month in April, when prices tumbled into a bear market, International Monetary Fund data show.
To contact the reporters on this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net
