(Bloomberg) — The yen rose, recouping much of Tuesday’s losses, amid a largely directionless Asian session as traders debated the size of a potential Federal Reserve interest-rate cut. Stocks were mixed.
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Japan’s currency strengthened as much as 0.8% after sinking 1.3% in New York, helping to cause a whipsaw day for Japanese stocks. Market-implied odds are currently putting the chance of a half-point Fed rate cut Wednesday at just over 50%. The central bank will also release new quarterly projections, and Chair Jerome Powell will hold a press conference.
While most Asian stocks were lower, US equity futures ticked up after the S&P 500 Index touched a new record high Tuesday. The dollar and Treasuries were both little changed.
“There are more questions than answers on a 25- or 50-basis-point cut,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore. “It appears like a cautious day on the bench, by the sidelines as the Fed is awaited.”
Economists largely anticipate the Federal Open Market Committee will reduce rates by a quarter point to a range of 5% to 5.25%, though a number expect a half-point move. Investors see better-than-even odds of a half-point adjustment.
Fresh quarterly projections in the form of the so-called “dot plot” released at the conclusion of the central bank’s two-day meeting will offer further insight into the path ahead for borrowing costs and the economy.
Traders who are locked into record wagers tied to the Fed’s expected rate cut are risking sharp losses if officials opt for a standard-sized reduction. In some markets, investors are primed for further easing from their local central banks in anticipation that the Fed will take more aggressive action to head off a slowdown.
Yen’s Rebound
The yen pared losses from Tuesday as traders awaited the Fed decision and also a Bank of Japan meeting later this week. BOJ Governor Kazuo Ueda and his colleagues are forecast to keep their benchmark on hold Friday and discuss whether conditions are falling into place for another hike this year.
Chinese chip-related stocks jumped after the nation claimed a breakthrough in the development of homegrown chip-making equipment. Shanghai Zhangjiang High-Tech Park Development jumped by the daily 10% limit, while Changchun UP Optotech and Sai Micro Electronics also rallied.
What Powell says in his press conference about the state of the US economy may help build confidence for those worried about a recession in the near term, according to Kristina Hooper at Invesco, who expects the Fed to cut by 25 basis points.
“It will be valuable to hear Powell’s thoughts on the expected path of rate cuts — in particular, what conditions could trigger a change of course, either a moderation or acceleration in easing,” she said.
Oil edged lower after a two-day gain as traders assessed indications of higher US stockpiles, rising tensions in the Middle East, and the likely course of the Federal Reserve’s rate path. Crude jumped Tuesday after thousands were hurt in what Hezbollah labeled an attack by Israel involving pagers in Lebanon.
Key events this week:
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Eurozone CPI, Wednesday
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Fed rate decision, Wednesday
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UK rate decision, Thursday
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US US Conf. Board leading index, initial jobless claims, US existing home sales, Thursday
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FedEx earnings, Thursday
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Japan rate decision, Friday
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Eurozone consumer confidence, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 1:52 p.m. Tokyo time
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Japan’s Topix fell 0.4%
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Australia’s S&P/ASX 200 fell 0.1%
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The Shanghai Composite was little changed
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Euro Stoxx 50 futures fell 0.1%
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Nasdaq 100 futures were little changed
Currencies
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The Bloomberg Dollar Spot Index fell 0.1%
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The euro was little changed at $1.1122
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The Japanese yen rose 0.8% to 141.33 per dollar
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The offshore yuan rose 0.2% to 7.0980 per dollar
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The Australian dollar was little changed at $0.6754
Cryptocurrencies
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Bitcoin rose 0.3% to $60,345.86
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Ether fell 1.1% to $2,319.93
Bonds
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The yield on 10-year Treasuries was little changed at 3.64%
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Japan’s 10-year yield was unchanged at 0.815%
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Australia’s 10-year yield advanced two basis points to 3.85%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck.
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