Asia-Pacific markets trade mixed as Japanese stocks see second day of losses
Bank shares in Tokyo rise again as broader index falls
The Japanese yen is stronger in more than four months
The Japanese yen strengthened further overnight after the Bank of Japan announced the widening of its yield curve control band.
The currency strengthened by more than 5% against the Australian dollar and the New Zealand dollar, while it was over 3% against the US dollar.
The yen strengthened after the Bank of Japan announced the expansion of its control band of the yield curve
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Stocks hold gains, break 4-day losing streak
The shares posted a gain on Tuesday, snapping a four-day losing streak.
The Dow Jones Industrial Average rose 92.47 points, or 0.28%, to close at 32,850.01. The S&P 500 gained 0.11% to 3,821.73, while the Nasdaq Composite added 0.01% to close at 10,547.11.
Bank of Japan is more aggressive sooner than expected, notes
The Surprise policy change from the Bank of Japan triggered a rise in interest rates globally, as investors reacted to more evidence that central bankers around the world will continue to push interest rates higher.
“It definitely came as a surprise. I don’t think anyone expected it,” said Ben Jeffrey, rates strategist at BMO. The Japanese central bank moved earlier than expected to tighten policy. The BOJ changed its yield curve policy to allow the 10-year Japanese government bond yield to move 50 basis points to either side of its zero target rate, up from 25 basis points.
The announcement sent rates up around the world as Japanese Government Bond (JGB) yields rose to 7-year highs. Rates move against yield. The US 10-year bond jumped 3.68%.
“They were definitely last to stay in terms of being moderate, and now they’re still moderate, but less so,” Jeffrey said. “Obviously JGBs and fixed income are bearish globally, but over the longer term it should help the yen, making Treasuries more attractive to Japanese investors next year.”
Expect a more challenging environment ahead, says Atlantic Equities
Atlantic Equities analysts anticipate a more challenging environment for the global consumer in 2023.
“Inflation may have peaked broadly, but input costs remain high and companies will look to at least hold, if not take higher prices in some cases,” analyst Edward Lewis said in a note. on Tuesday. “That may become more challenging as elasticity levels begin to normalize with US retailers starting to push prices down, in line with European peers throughout the year.”
He singled out Coke and Pepsi as some of his favorite consumer picks, citing “category momentum, continued investment and strong execution that support strong growth.”
The stock market has lost $11.7 trillion so far this year
It’s been a tough year for stocks, which are currently in a bear and down market year to date.
From the annual market high on January 3 through this morning, US stocks have lost $11.7 trillion in market capitalization, according to data from the Bespoke Group.
“The top draw was $13.6 trillion at the Sept. 30 low, so we’ve seen market capitalization rise by just under $2 trillion since then,” the analysts wrote on Tuesday. “In dollar terms, this drawdown has been more extreme than anything investors have experienced. That’s pretty deflationary if you ask us!”
Of the $11.7 trillion, more than $5 trillion in losses came from just five companies: Apple, Microsoft, Amazon, Alphabet, Meta, and Tesla.