USDJPY - ReportWire

Hang Seng leads selloff for Asia stocks, with 4% slump after China data

TOKYO (AP) — Asian shares slid Wednesday after a decline overnight on Wall Street and disappointing China growth data, while Tokyo’s main benchmark momentarily hit another 30-year high.

Japan’s benchmark Nikkei 225
NIY00,
-0.95%
reached a session high of 36,239.22, but reverted lower, last down 0.3% to 35,477. The Nikkei has been hitting new 34-year highs, or the best since February 1990 during the so-called financial bubble. Buying focused on semiconductor-related shares, and a cheap yen helped boost exporter issues.

Don’t miss: Wall Street firms catch up to Buffett enthusiasm on Japan as Nikkei keeps hitting records

Hong Kong’s Hang Seng
HK:HSCI
tumbled 4% to 15,220.72, with losses building after data showed China hitting its economic growth target of 5.2% for 2023, surpassing government expectations, but short of the 5.3% some analysts expected. The Shanghai Composite
CN:SHCOMP
shed 2% to 2,833.62.

Read on: China hit its economic-growth target without ‘massive stimulus,’ boasts Premier Li Qiang

Australia’s S&P/ASX 200
AU:ASX10000
slipped 0.2% to 7,401.30. South Korea’s Kospi
KR:180721
dropped 2.4% to 2,435.90.

Investors were keeping their eyes on upcoming earnings reports, as well as potential moves by the world’s central banks, to gauge their next moves.
Wall Street slipped in a lackluster return to trading following a three-day holiday weekend.

See: What’s next for stocks as ‘tired’ market stalls in 2024 ahead of closely watched retail sales

The S&P 500
SPX
fell 17.85 points, or 0.4%, to 4,765.98. The Dow Jones Industrial Average
DJIA
dropped 231.86, or 0.6%, to 37,361.12, and the Nasdaq
COMP
sank 28.41, or 0.2%, to 14,944.35.

Spirit Airlines
SAVE,
-47.09%
lost 47.1% after a U.S. judge blocked its takeover by JetBlue Airways
JBLU,
+4.91%
on concerns it would mean higher airfares for flyers. JetBlue rose 4.9%.

Stocks of banks were mixed, meanwhile, as earnings reporting season ramps up for the final three months of 2023. Morgan Stanley
MS,
-4.16%
sank 4.2% after it said a legal matter and a special assessment knocked $535 million off its pretax earnings, while Goldman Sachs
GS,
+0.71%
edged 0.7% higher after reporting results that topped Wall Street’s forecasts.

Companies across the S&P 500 are likely to report meager growth in profits for the fourth quarter from a year earlier, if any, if Wall Street analysts’ forecasts are to be believed. Earnings have been under pressure for more than a year because of rising costs amid high inflation.

But optimism is higher for 2024, where analysts are forecasting a strong 11.8% growth in earnings per share for S&P 500 companies, according to FactSet. That, plus expectations for several cuts to interest rates by the Federal Reserve this year, have helped the S&P 500 rally to 10 winning weeks in the last 11. The index remains within 0.6% of its all-time high set two years ago.

Treasury yields
BX:TMUBMUSD10Y
have already sunk on expectations for upcoming cuts to interest rates, which traders believe could begin as early as March. It’s a sharp turnaround from the past couple years, when the Federal Reserve was hiking rates drastically in hopes of getting high inflation under control.

The Tell: No rate cuts in 2024? Why investors should think about the ‘unthinkable.’

Easier rates and yields relax the pressure on the economy and financial system, while also boosting prices for investments. And for the past six months, interest rates have been the main force moving the stock market, according to Michael Wilson, strategist at Morgan Stanley.

He sees that dynamic continuing in the near term, with the “bond market still in charge.”

For now, traders are penciling in many more cuts to rates through 2024 than the Fed itself has indicated. That raises the potential for big market swings around each speech by a Fed official or economic report.

Yields rose in the bond market after Fed governor Christopher Waller said in a speech that “policy is set properly” on interest rates. Following the speech, traders pushed some bets for the Fed’s first cut to rates to happen in May instead of March.

On Wall Street, Boeing fell to one of the market’s sharper losses as worries continue about troubles for its 737 Max 9 aircraft following the recent in-flight blowout of an Alaska Air
ALK,
-2.13%
jet. Boeing
BA,
-7.89%
lost 7.9%.

In energy trading, benchmark U.S. crude
CL00,
-1.55%
lost 90 cents to $71.75 a barrel. Brent crude
BRN00,
-1.37%,
the international standard, fell 78 cents to $77.68 a barrel.

In currency trading, the U.S. dollar
USDJPY,
+0.44%
rose to 147.90 Japanese yen from 147.09 yen. The euro
EURUSD,
-0.10%
cost $1.0868, down from $1.0880.

MarketWatch contributed to this report

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January 16, 2024

Japanese yen sees wild swing amid intervention fears after falling to nearly 1-year low versus dollar

The Japanese yen roared back violently against the dollar Tuesday amid fears of intervention by Tokyo after trading at its weakest in nearly a year after a round of strong U.S. employment data.

The U.S. dollar fetched 148.92 Japanese yen
USDJPY,
-0.42%,
down 0.6%, after trading as low as 147.415 yen in a sharp tumble from a session high of 150.18 yen. The dollar hadn’t traded above the 150-yen level since Oct. 21, 2022, according to FactSet data.

Japanese authorities in the fall of 2022 intervened in the market, selling dollars and buying yen as the Japanese currency slumped. Currency traders had been on the lookout for renewed intervention as the yen extended its recent weakness. Japan’s Ministry of Finance has issued several verbal warnings over recent weeks, but they have failed to arrest the yen’s fall.

Finance Minister Shunichi Suzuki earlier Tuesday had warned that “all measures are on the table with a high sense of urgency,” according to Nikkei.

But FX analysts were skeptical the yen’s bounceback was due to intervention.

“Talk of intervention but I am skeptical. It seems like the market is doing it to itself with orders to sell dollar above JPY150. BOJ intervened three times last year, none was during US time zone,” said Marc Chandler, managing director at Bannockburn Global Forex, in a note to clients.

The dollar had initially extended its rally versus the yen and other major currencies after data showed U.S. job openings jumped unexpectedly to 9.6 million in September, up from a revised 8.9 million in August. Analysts surveyed by The Wall Street Journal had expected a reading of 8.8 million.

Continued strength in the labor market added to a rise in Treasury yields
BX:TMUBMUSD10Y,
which in turn boosted the dollar. The ICE U.S. Dollar Index
DXY,
a measure of the currency against a basket of six major rivals, remained up 0.1% at 107.06, after trading at its highest since November.

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October 3, 2023

U.S. dollar defies China, Russia and Wall Street skeptics as 2023 rebound continues

The U.S. dollar is proving its haters wrong.

Not only is the buck defying the expectations of Wall Street strategists who had anticipated that it would weaken this year, it’s also proving once again that talk of de-dollarization has been over-hyped.

In financial markets, a gauge of the dollar’s value against its biggest rivals is nearing its highest level in six months. The ICE U.S. Dollar Index
DXY,
a gauge of the dollar’s strength against the euro
EURUSD,
-0.01%
and other major currencies like the Japanese yen
USDJPY,
-0.09%
and British pound
GBPUSD,
+0.21%,
traded at its highest level since early June on Friday after Federal Reserve Chairman Jerome Powell helped catapult it higher by talking up the possibility of more interest-rate hikes.

The index was adding to those gains on Monday, trading 0.1% higher at 104.13, according to FactSet data. A break above 104.70 would put it at its highest intraday level since March 16. The index is up 0.5% since the start of the year, having erased earlier year-to-date losses over the past six weeks.

Earlier this year, dollar weakness occurred against the backdrop of U.S. rivals like China and Russia making strides in their efforts to wean themselves off the buck.

But despite their efforts, data released last week by SWIFT, the nexus of international interbank financial transactions, showed that the dollar has never been more popular as a means of settling international trade and transactions.

SWIFT’s data showed that 46% of interbank payments conducted on the platform in July involved the U.S. dollar, a record high. The data also showed that the Chinese yuan’s share of international payments had ticked higher while the euro’s declined.

As if to underscore this point, the data from SWIFT arrived late last week just as a summit hosted by the BRICS nations in Johannesburg, South Africa, was breaking up.

Rather than being a watershed event for opponents of the U.S. dollar, as some had feared, statements from the group’s members revealed internal disagreement on the subject of a BRICS currency intended to offer an alternative to the greenback.

What’s more, while the economic alliance announced plans to admit a spate of new member nations in its first expansion in 13 years, one notable holdout seemed to spoil the party.

Indonesian President Joko Widodo opted to keep his country, one of the world’s most populous, with a fast-expanding economy, out of the economic alliance, at least for now.

To be sure, as MarketWatch reported back in April, talk of de-dollarization is hardly a new phenomenon, but it has received renewed attention as China, Russia and others have redoubled efforts to try and push for countries to conduct more trade in their own currencies as opposed to the dollar.

But Russia and China aren’t alone in their disappointment at the dollar’s resilience.

A compilation of 2023 year-ahead outlooks produced by Bloomberg News back in December showed investment houses in Europe and the U.S. widely expected the buck to weaken this year, with some reasoning that the two-decade high reached by the dollar index in late September likely marked its peak for the cycle.

The ICE index traded as high as 114.78 on Sept. 28, its highest level since May 2002, according to FactSet data. The milestone marked the peak of a torrid rally that saw the buck emerge as one of the few havens from a punishing selloff in stocks and bonds that defined global markets in 2022. But the gauge has fallen 9.3% since then.

Now, with real yields in the U.S. pushing higher and Federal Reserve Chairman Jerome Powell hinting at the possibility of more interest-rate hikes later this year, strategists say the conditions are ideal for the U.S. dollar to climb even higher.

“Interest-rate differentials and relative economic strength are the foundation [of dollar strength],” Matt Miskin, co-chief investment strategist for John Hancock Investment Management, said during a phone interview with MarketWatch.

China’s struggles to revive its flagging economy have helped bolster the dollar while pushing the Chinese yuan
USDCNY,
-0.01%
toward its weakest level since late last year. The offshore yuan traded at 7.29 to the dollar on Monday, near its weakest level since November.

Read this next: Opinion: The debt supercycle that hit the U.S. and Europe has now come for China

A weakening eurozone economy has weighed on the euro and boosted the dollar. PMI survey data released earlier this month showed Europe’s services sector weakening alongside manufacturing. GDP data released by Eurostat, Europe’s official economic statistics agency, has been tepid compared to the U.S. The latest reading on second-quarter GDP put it at 0.3%.

Right now, the dollar will be tough to beat given the twin tailwinds created by rising real interest rates and still-robust economic growth.

The yield on the 10-year Treasury Inflation-Protected Security note
912828B253
was trading north of 2.2% Friday, according to data from the St. Louis Fed. The 10-year TIPS yield hit its highest level since 2009 earlier this month when it broke north of 2%. The inflation-protected security is often cited as a proxy for U.S. “real” yields, which refers to the return bond investors receive after adjusting for inflation.

On the growth side of the equation, the Atlanta Fed’s GDPNow forecast estimated the rate of growth for the third quarter at 5.9% according to its latest reading dated Thursday. A year ago, even the most optimistic economists on Wall Street were expecting growth of about 2%, and top Fed officials had a median projection of 1.2% growth for 2023, according to projections released in September.

“It’s hard to beat the dollar when it is a high yielder among safe havens in a risk-off environment,” Steve Englander, head of North America macro strategy at Standard Chartered, said in comments emailed to MarketWatch.

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August 28, 2023

Why U.S. stocks and bonds stumbled on talk of a Bank of Japan policy tweak

Worries about a possible policy tweak by the Bank of Japan threw a wet blanket on a stretched U.S. stock-market rally Thursday, with the Dow Jones Industrial Average snapping its longest winning streak since 1987 after the 10-year Treasury yield surged back above the 4% level.

The Japanese yen also strengthened after a news report said policy makers on Friday would discuss a possible tweak to the Bank of Japan’s so-called yield-curve control policy that would loosen the cap on long-dated government bond yields.

Nikkei, without citing sources, reported that BOJ officials would talk about the matter at Friday’s policy meeting and that the potential change would allow the yield on the 10-year Japanese government bond
TMBMKJP-10Y,
0.440%
to trade above its cap of 0.5% “to some degree.”

‘Ultimate fear’

Why is that a negative for U.S. Treasurys and, in turn, U.S. stocks?

The “ultimate fear” is that Japanese investors, who have vast holdings of U.S. fixed income, including Treasury notes and other securities, “begin to see a higher level of yields in their own backyard,” Torsten Slok, chief economist at Apollo Global Management, told MarketWatch in a phone interview. That could prompt heavy liquidation of those U.S. positions as investors repatriate holdings to reinvest the proceeds at home.

That dynamic explains the knee-jerk reaction that saw the 10-year U.S. Treasury yield
TMUBMUSD10Y,
4.004%
surge more than 16 basis points to end above 4%, he said. Yields rise as debt prices fall.

The surge in yields, in turn, saw stocks give up early gains, with U.S. indexes ending lower across the board.

What is yield curve control?

The Bank of Japan began implementing yield curve control, or YCC, in 2016, a policy that aims to keep government bond yields low while ensuring an upward-sloping yield curve. Under YCC, the BOJ buys whatever amount of JGBs is necessary to ensure the 10-year yield remains below 0.5%.

Nikkei said a possible tweak would allow gradual increases in the yield above 0.5%, but would clamp down on any sudden spikes, allowing the BOJ to rein in fluctuations driven by speculators.

Global market participants are sensitive to changes in YCC. The BOJ sent shock waves through markets in December when it lifted the cap from 0.25% to 0.5%. Investors were rattled by the prospect of the Bank of Japan giving up its role as the remaining low-rate anchor among major central banks.

BOJ Gov. Kazuo Ueda in May said the bank would start shrinking its balance sheet and end its yield-curve control policy if a 2% inflation looks achievable and sustainable after many years of undershooting.

Yen rallies

The yield on the 10-year JGB has traded above 0.4%, but remained below the 0.5% cap. Continued interest rate rises by the Federal Reserve and other major central banks in the past year have raised worries that the 10-year JGB yield could test the limit, Nikkei reported. Those rate hikes, meanwhile, have added pressure to the yen, whose weakness is seen contributing to inflation pressures.

The yen
USDJPY,
-0.02%
strengthened following the report. The U.S. dollar was off 0.5% versus the currency, fetching 139.48 yen.

The Dow Jones Industrial Average
DJIA,
-0.67%
ended the day down nearly 240 points, or 0.7%, snapping a 13-day winning streak, while the S&P 500
SPX,
-0.64%
declined 0.6% and the Nasdaq Composite
COMP,
-0.55%
lost 0.5%.

Japanese stocks have solidly outpaced strong gains for U.S. equities in 2023, with the Nikkei 225
NIK,
+0.68%
up 26% so far this year versus an 18.7% rise for the S&P 500.

See: Japan’s stock market is roaring 25% higher. These 4 things could keep the rally going.

What’s next

Investors are waiting to see what the Bank of Japan actually has to say.

While the Nikkei report helped “exaggerate” a selloff in Treasurys, the market may be inoculated against bigger swings after the BOJ’s December adjustment to the rate band, said Ian Lyngen and Benjamin Jeffery, rates strategists at BMO Capital Markets, in a note.

The analysts said they expect that “the magnitude of the follow through repricing in U.S. rates will be comparatively more contained than would otherwise be expected.”

More recently, the weak yen has raised the cost of hedging long Treasury positions for Japanese investors. So a stronger yen resulting from a shift toward tighter policy would help make hedging costs for owning Treasurys less onerous for Japanese investors as well, Lyngen and Jeffery wrote, “which over the longer term may begin to make Treasurys more attractive to Japanese buyers and add to the list of sources for duration demand.”

That could make U.S. debt more attractive to new Japanese buyers, Slok agreed.

But that’s oveshadowed by the near-term worry, Slok said, that existing Japanese investors will be inclined to sell Treasurys. Flow data will be very much in focus if the Bank of Japan follows through on the apparent trial balloon floated in the Nikkei report.

Investors will be watching, he said, to see “if the train is leaving the station.”

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July 27, 2023

U.S. stock futures little changed after short-lived Wagner mutiny in Russia; oil futures rise

U.S. stock-index futures opened near unchanged and attempted to edge higher Sunday night, as investors reacted to chaotic weekend events that saw a short-lived rebellion that pitted the mercenary Wagner Group against the Russian military leadership. After advancing to within around two hours of Moscow, the mutiny was abruptly halted, with Wagner Group leader Yevgeny Prigozhin reportedly agreeing to depart for Belarus. Analysts said the events, while a potential plus for Ukraine 16 months after Russia’s invasion, appeared to weaken Russian President Vladimir Putin’s hold on the country, That raises concerns about the potential for further internal strife, a recipe for uncertainty that could feed volatility in financial markets. Futures on the Dow Jones Industrial Average
YM00,
+0.09%
rose 20 points, while S&P 500
ES00,
+0.10%
futures ticked up 2.75 points and Nasdaq-100 futures
NQ00,
+0.16%
edged up 11.25 points shortly after the start of electronic trading. Moves for all three contracts amounted to less than 0.1%. Stocks fell last week, with the S&P 500
SPX,
-0.77%
snappng a streak of five straight weekly gains. Oil futures rose, with West Texas Intermediate crude for August delivery
CL.1,
+1.26%

CL00,
+1.26%,
the U.S. benchmark, up 48 cents, or 0.7%, at $69.64 a barrel on the New York Mercantile Exchange.

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June 25, 2023

Is Japan’s world-beating stock-market rally merely a function of a weak yen?

Japanese stocks are primed to outpace global peers this year, with the Nikkei 225 Stock Average reaching its highest level in nearly 33 years last week and up 17.6% year-to-date.

However, most of the Japan’s stock outperformance is a direct result of renewed weakness in Japanese yen, and it could tell us little about domestic policy or economic performance in Japan, argued Adam Cole, chief currency strategist at RBC Capital Markets.

Unsurprisingly, Japan’s outperformance is attracting attention. Investors have cited a number of drivers besides a weak yen, including corporate governance reforms, a push to return cash to shareholders, and cheaper valuations and lower volatility relative to much of the U.S. market.

Billionaire investor Warren Buffett is also feeding the excitement. Berkshire Hathaway Inc.
BRK.A,
+0.69%

BRK.B,
+0.59%
has boosted its stake in five Japanese trading conglomerates and now has more equity exposure in Japan than any other country outside the U.S.

The Nikkei
NIK,
+0.37%,
the best performing major market index of 2023, has solidly outperformed the S&P 500
SPX,
+1.17%,
which is up around 7% so far this year. The iShares MSCI Japan ETF
EWJ,
+0.32%,
which tracks the MSCI Japan Index, is up 9.7% in the year to date, versus a gain of 7.5% for the S&P 500-tracking SPDR S&P 500 ETF Trust
SPY,
+1.17%.

See: Japan’s stock market is smoking the S&P 500. Is it too late to jump in?

Cole, in a note, pointed to the chart below highlighting the relative performance of Japanese equities, which has recently followed the dollar/yen currency pair
USDJPY,
+0.33%
closely. It “should not be surprising given the prominence of exporters in listed Japanese companies,” he said in a Wednesday note.

SOURCE: RBC CAPITAL MARKETS, BLOOMBERG

The U.S. dollar fetched 139.45 yen Wednesday, its strongest level versus the Japanese currency since last November, amid broad strength for the greenback. The ICE U.S. Dollar index
DXY,
+0.03%,
which measures the currency’s strength against a basket of six major rivals, advanced 0.4% to 103.90 on Wednesday, according to FactSet data.

Cole thinks there is strong evidence that economic activity in advanced economies has become less sensitive to exchange-rate movements over the last 30 years as moves in foreign exchange tend to be “fully passed through to trade prices and hence export margins.”

As a result, internationally-exposed equity markets have become more sensitive to exchange-rate movements.

When comparing the Nikkei 225’s performance relative to the MSCI World Index
990100,
+0.29%,
which represents large and midcap equity performance across all 23 developed markets, Cole said Japanese equities are almost “exactly in the middle of the last 30 years’ range, rather than being at a 30 year high.”

If RBC’s expectation of further yen weakness is correct, Japanese stocks may still have the potential to continue their outperformance, said Cole.

He warned, however, that investors should be aware that the causality should run from the currency to the equity market, instead of the other way. That means the rally in the equity market tells us “little about domestic policy or economic performance in Japan,” Cole said.

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May 26, 2023

Wall Street cheers latest inflation report, but some say it could spell trouble for stocks down the road

Wall Street embraced the U.S. April consumer-price index, a closely watched inflation gauge published Wednesday, with cautious optimism.

But some Wall Street analysts are worried inflation might not be slowing quickly enough to satisfy the market’s expectation for as many as three interest-rate cuts by the Fed before the end of the year.

U.S….

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May 10, 2023

$3,000 gold and more outrageous market predictions investors shouldn’t brush aside.

Monday served as another smackdown for investors who are banking on a Goldilocks economy and a less aggressive Fed.

Some are now not ruling out a Grinch-like turn from the central bank — a 0.75% hike next week instead of the 0.50% markets have been pinning hopes on — following strong data on services, jobs and wages.

It all goes along with the theme of 2022 — expect the unexpected. The relief of moving out of a crippling pandemic was quickly replaced by the biggest war on Europe’s shores in decades, that sparked worldwide inflation surges.

What comes next is anyone’s guess and that brings us to our call of the day via Saxo Bank’s annual “Outrageous Predictions” for 2023.

While some of these will sound crazy, note that the Saxo team, led by Chief Investment Officer Steen Jakobsen, have nailed a few wild prophecies in the past decade. Those include: a Brexit prediction in 2015, a 25% drop for the S&P 500 from its 2007 high in 2008, a tripling of Bitcoin’s value forecast in 2017.

The focus for 2023’s prediction is that “a return to the disinflationary prepandemic dynamic is impossible because we have entered into a global war economy, with every major power across the world now scrambling to shore up their national security on all fronts; whether in an actual military sense, or due to profound supply-chain, energy and even financial insecurities that have been laid bare by the pandemic experience and Russia’s invasion of Ukraine,” says Jakobsen.

As for those predictions, here we go:

Gold crosses $2,075 then rockets to $3,000 on unstoppable inflation. “Fed policy tightening and quantitative tightening drives a new snag in U.S. treasury markets that forces new sneaky ‘measures’ to contain Treasury market volatility that really amounts to new de facto quantitative easing,” says Saxo. And China’s end of zero-COVID drives up demand, commodity prices and inflation.
Widespread price controls to cap official inflation due to war economy mentality. “In 2023, expect broadening price and even wage controls, maybe even something like a new National Board for Prices and Incomes being established in the U.K. and the U.S.,” said Saxo. Market fallout? Fuel for gold’s
GC00,
+0.19%
climb.
There’s a new reserve asset in town. Non U.S.-allied countries move away from the U.S. and IMF to create an “international clearing union (ICU) and a new reserve asset, called the Bancor (currency code KEY)” that borrows from economist John Maynard Keynes idea of resisting U.S. power over the international monetary system. Nonaligned central banks slash U.S. dollar reserves, Treasury yields soar and the dollar
DXY,
+0.09%
drops 25% against a basket of currencies that trade with Bancor.
Japan pegs USDJPY to 200. Pressure intensifies on the already weak yen
USDJPY,
+0.04%
into 2023 as currency intervention fails and inflation soars. The government resets the financial system, erasing all debt, recapitalizing banks, as trillions of yen return to Japan shores. But the yen still weakens by year-end.
A $10 trillion-dollar Manhattan project. A team of major tech leaders form a mega research-and-development effort for energy infrastructure and ground-breaking technologies — the Third Stone. Companies tied to the project soar in an overall weak environment for investing.
Tax haven ban kills private equity. The OECD launches a full ban on the biggest tax havens in the world in 2023 and in the U.S., carried interest tax as capital gains is shifted to ordinary income. It’s a body blow for private equity and venture capital — the valuation of publicly listed private-equity firms fall 50%.

The rest of their predictions are here, such as the formation of an EU Armed Forces in 2023 and an “UnBrexit” referendum.

Read: Why Monday’s stock-market rout should be a wake up call for investors

The markets

MarketWatch

Stocks
DJIA,
-0.96%

SPX,
-1.40%

COMP,
-1.77%
are drifting into the red, with Treasury yields
TMUBMUSD10Y,
3.571%

TMUBMUSD02Y,
4.395%
steady, the dollar
DXY,
+0.09%
lower and oil
CL.1,
-3.43%

BRN00,
-3.73%
also down.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

BioVie stock
BIVI,
-18.43%
is climbing after positive results from the clinical-stage biopharmaceutical company on a drug for Parkinson’s and Alzheimer’s.

NRG Energy
NRG,
-15.79%
agreed to buy Vivint Smart Home
VVNT,
+32.31%
in a $5.2 billion deal. Vivint shares are soaring.

MEI Pharma
MEIP,
-33.52%
shares are tumbing after drugmaker said it would stop developing cancer treatment zandelisib outside of Japan and announces job cuts. Herbalife shares
HLF,
-18.85%
are down 10% after an offering of convertible notes

Powell Industries
POWL,
+19.11%
stock is up 9% after the electrical equipment maker’s well-received results and new orders. Within software Sumo Logic
SUMO,
+11.65%
and GitLab shares
GTLB,
+5.71%
are surging on upbeat results and forecasts.

Layoffs extending beyond tech? PepsiCo
PEP,
-0.86%
is reportedly cutting hundreds of workers at its North American headquarters.

Home builder Toll Brothers
TOL,
-1.56%
will report results after the close.

The October trade deficit jumped 5.4% to $78,2 billion.

The U.S. and EU are reportedly considering fresh steel and aluminum tariffs on China to fight carbon emissions.

Best of the web

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The chart

Headed into the holidays, consumers are using savings and credit, says a team of Jefferies analysts led by Corey Tarlowe. “The savings rate continues to trend lower and credit card balances are growing +15% Y/Y. We believe these trends indicate that the consumer is stretched.”

Against this backdrop, they like Costco
COST,
-1.34%,
Dollar General
DG,
-1.52%,
Target
TGT,
+0.13%
and Walmart
WMT,
-0.98%.

The tickers

These were the top-searched tickers on MarketWatch at 6 a.m.:

Ticker	Security name
TSLA, -2.00%	Tesla
GME, -5.32%	GameStop
AMC, -9.00%	AMC Entertainment
NIO, +2.37%	NIO
BBBY, -8.86%	Bed Bath & Beyond
AAPL, -1.83%	Apple
APE, -5.40%	AMC Entertainment Holdings preferred shares
COSM, -17.49%	Cosmos
AMZN, -2.26%	Amazon.com
MULN, -3.08%	Mullen Automotive

Random reads

Tributes pour after “Cheers” star Kirstie Alley dies at 71.

Happy 190th birthday to the world’s oldest tortoise.

A green Grinchy dog for Christmas? Not everyone’s heart grew three sizes.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton

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December 6, 2022

Many investors are betting on an inflation peak. Here’s why a former hedge-fund manager says they’re wrong.

Investors are waking up to big trouble in big China. Stock futures and oil prices are falling after angry anti-COVID zero protests swept the country.

“This is a sudden powerful new distraction for markets when this week was supposed to be about incoming U.S. data,” sum up strategists at Saxo Bank. They say watch companies exposed to China, “given forward earnings are likely to be downgraded following further China lockdowns and protests.”

Before China grabbed the spotlight, holiday weekend sales, jobs and inflation data that due this week, as well as remarks by Fed Chairman Jerome Powell were the big focus.

Other questions are now swirling. Will China-related falls in oil prices lend to the peak inflation theory? And what about China’s post-COVID economic rebirth?

Onto our call of the day, which says it’s time to short long bonds because of sticky food inflation — thanks to China. It comes from Russell Clark, a former hedge-fund manager who has spent the last 20 years focusing on that market, macro and short selling.

He notes investors have been scooping up the the iShares 20 years+ Treasury Bond ETF
TLT,
-0.34%,
a liquid exchange-traded fund that buys long-dated bonds, even as with U.S. inflation hovering at 1970 highs.

“The reason that people are getting bullish bonds I believe is that the yield curve has inverted. And every time that has happened, you have a recession and you want to get out of equities and into bonds,” says Clark. A yield curve inversion occurs when long-term interest rates drop below short term rates. The inversion of 2 and 10-year Treasury yields is at its steepest since the 1980s.

Clues may lie in Japan’s poorly performing bond market. “Not only has it been prescient in leading the U.S. bond yields lower from 1999 onward, in 2020 the JGB market was also prescient in signaling the future U.S. treasury sell off,” he says.

Russell Clark

And what Japan is likely seeing that U.S. investors aren’t right now is China-driven food inflation. That’s something the Fed will find it tough to ignore, he said.

Since the since the 1980s, food commodity prices have followed raw commodity prices higher, If the Fed wants to work that down, it will raise interest rates. For example, falling natural-gas prices
NG00,
-3.37%
would help ease fertilizer costs for farmers.

Clark points out that China is the world’s biggest food importer, with much higher prices than the U.S.

“Pork, which is the most consumed meat in China, is now 3 times more expensive than the U.S. market, and has recently doubled in price. As Japan is also a large importer of pork, perhaps this was the reason the JGB market sold off before the U.S.,” he said.

Beef is also a major import for China, and yes, prices are much higher than that of the U.S.

“In essence, I am saying that China is exporting food inflation to the rest of the world, and I don’t see that ending at the moment. JGBs seem to agree – and when I look at the index value of US Food CPI on a log basis, I keep thinking that is says interest rates are going higher not lower,” said Clark.

He sees food inflation looking secular, rather than cyclical, due to the demands of an increasingly urbanized China. “Secular food inflation implies POLITICAL pressure to have higher interest rates. US treasuries look a short to me, just as everyone has gotten long,” he said.

The markets

Stock futures
ES00,
-0.73%

YM00,
-0.54%

NQ00,
-0.72%
are falling, and Treasury yields
TMUBMUSD10Y,
3.684%

TMUBMUSD02Y,
4.467%
and oil
CL.1,
-3.12%
also are falling. The Japanese yen
USDJPY,
-0.61%
is seeing some safe-haven bids. The Hong Kong Hang Seng Index
HSI,
-1.57%
closed down 1.5%.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

An apartment-building fire in a locked-down city that killed 10 appeared to spark protests across China, calling for the President Xi Jinping to step down and zero-COVID policies to stop. A BBC reporter was arrested and beaten. Meanwhile, lockdowns mean China farmers are destroying crops they can’t sell.

And similar unrest at China’s Zhengzhou Foxconn
2317,
-0.50%
factory is expected to cause a shortfall of 6 million Apple
AAPL,
-1.96%
iPhone Pros this year.

Pinduoduo shares
PDD,
-1.44%
are soaring after the China-based mobile marketplace reported profit and revenue beats.

MGM Resorts
MGM,
-0.42%,
Las Vegas Sands
LVS,
+0.26%
and Wynn Resorts
WYNN,
-0.57%
higher in premarket after Macao tentatively renewed their casino licenses.

Retailers are in focus after Black Friday online sales topped a record $9 billion. That’s as some wonder if Cyber Monday is still a thing.

St. Louis Fed President James Bullard will sit down for an interview with MarketWatch on Monday, at 12 noon Eastern. New York Fed President John Williams address the Economic Club of New York at the same time. Fed’s Powell will speak on Wednesday, along with several other Fed officials this week.

A busy data week starts Tuesday with home-price indexes and consumer confidence data. GDP, the PCE price index for October — a favored gauge of the Federal Reserve and November employment data are also on tap this week.

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Iran was calling for the U.S. to be expelled from the Qatar World Cup.

Lab study shows next COVID strain will be more deadly.

The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:

Ticker	Security name
TSLA, -0.19%	Tesla
GME, -1.99%	GameStop
AMC, -1.70%	AMC Entertainment
AAPL, -1.96%	Apple
COSM, +34.06%	Cosmos Holdings
AMZN, -0.76%	Amazon.com
BBBY, -2.70%	Bed Bath & Beyond
MULN, -2.39%	Mullen Automotive
APE, +0.83%	AMC Entertainment Holdings preferred shares
DWAC, +6.44%	Digital World Acquisition Corp.

Random reads

Chinese woman on a mission to visit everyone else’s lonely elderly relatives.

‘Gaslighting’ is Merriam Webster’s word of the year. No, really.

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November 28, 2022

USDJPY | Japanese Yen Overview | MarketWatch

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From:

Tag: USDJPY

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