Asian stocks fluctuated Thursday, while yen and U.S. bonds tried rebounding, as global investors navigated a volatile market week.
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Japan’s Nikkei swung from -2.5% to +0.8%, finally 0.6% lower at 0445 GMT, down 2.8% for the week despite a rebound.
Tech shares notably underperformed on the Nikkei, following a 1.1% overnight drop in Wall Street’s Nasdaq Composite.
Taiwan’s tech-heavy market benchmark fell 1.5%, while South Korea’s Kospi sank 0.9%.
However, gains in Hong Kong’s Hang Seng and mainland blue chips limited MSCI Asia-Pacific index’s decline to 0.3%.
Nasdaq futures were turbulent, ending up flat after swinging between gains and losses.
Pan-European STOXX 50 futures fell 1.1%.
“Today’s Asia session could be important, as many had bought the dip with the hope that we see real follow-through buying and the upside momentum building,” said Chris Weston, head of research at Pepperstone.
“It’s clear that we have not been given all clear just yet.”
The yen benefits when sentiment sours; it rose 0.5% to 145.98 per dollar, peaking at 0.86% but dipping 0.14%.
The Swiss franc, another traditional haven, rose 0.3% to 0.8592 per dollar.
The dollar-yen pair reacts to U.S. Treasury yields, which retraced half their jump to 3.977%, now at 3.91% in Asia.
The dollar index fell 0.08% to 103.03, while the euro, conversely, rose 0.08% to $1.0931.
Currencies, especially the yen, fluctuated due to last week’s shift to steady Bank of Japan rates and aggressive Fed cuts.
As investors unwound yen carry trades, Japanese stocks were impacted. Although stabilizing, traders still seek equilibrium.
“Positioning is much cleaner across the board,” said Tony Sycamore, an analyst at IG.
“I know of very few funds, if any, that would allow their traders to hold positions given the magnitude of the moves we saw earlier in the week, particularly in the long ‘Japan Trade,’ i.e. long Nikkei and short JPY.”
Since the surprise rate hike, BOJ officials have sent mixed signals.
Uchida downplayed a near-term hike, yet the meeting summary showed a hawkish tone.
Meanwhile, weekly U.S. jobless claims could impact the market, especially after Friday’s weak payrolls heightened U.S. economic downturn fears.
Traders anticipate 111 basis points of Fed rate cuts this year, but analysts believe this expectation is excessive.
“During recent volatility episodes going back to the banking crisis in March 2023, the promise or pricing of aggressive Fed rate cuts has proven to be as effective as actual rate cuts, via the loosening in financial conditions,” said IG’s Sycamore.
“That’s enabled the Fed to save its rate cut bullets.”
Meanwhile, the leading cryptocurrency Bitcoin rose more than 3% to $56,877.
Crude oil rose further after data showed a larger-than-expected draw in U.S. crude stockpiles the previous day.
Brent crude futures rose 0.1% to $78.42, after a 2.4% increase, while U.S. West Texas Intermediate gained 0.3% to $75.45, extending a 2.8% overnight rally.
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