Japanese stocks fall on Yen support, yuan rebounds

Japanese stocks declined as the yen rose after the country’s top currency official warned against speculative moves in the foreign-exchange market.The yuan climbed following signs of support from Chinese authorities.

Tokyo’s Topix index dropped as much as 1% after recording its biggest weekly gain in two years. South Korea’s equity benchmark also fell while mainland Chinese, Hong Kong and Australian shares inched higher — offering a mixed picture for the region.

The offshore yuan rose as the dollar weakened and China’s central bank set a stronger-than-expected daily reference rate. The gap between the yuan’s daily fixing versus estimates was the widest since November, while Bloomberg calculations indicated the People’s Bank of China injected a net 40 billion yuan ($5.56 billion) in open market operations.

Chinese Premier Li Qiang had earlier downplayed investor concerns of challenges facing the economy, saying Beijing was stepping up policy support to spur growth and systemic risks are being addressed.

“Just saying the risks are not as much as people think is not going to draw investors back,” says Vey-Sern Ling, managing director at Union Bancaire Privee. “China is not just a ‘show me’ story for investors, it’s a ‘show me a lot more than I expect’ story

Treasuries were mostly steady following a rally on Friday that wiped seven basis points from the 10-year yield. Australian and New Zealand bond yields ticked lower Monday.
Those moves come ahead of a busy week of economic data that will include the Federal Reserve’s preferred inflation gauge due Friday. The core personal consumption expenditures index, which excludes food and energy costs, is seen rising 0.3% on the heels of its biggest monthly increase in a year.
Inflation readings are also due in Australia, France, Italy and Spain later this week, offering clarity on rising prices as investors begin to position for rate cuts.
US equity futures were little changed after a muted end to the week on Wall Street with the S&P 500 declining 0.1% and the Nasdaq index rising by the same margin on Friday.
“Tightening usually causes recessions when it triggers financial crises that turn into credit crunches,” said Ed Yardeni, president of his eponymous research firm, said in a Monday note. “That sequence of events is unlikely now,” he said, citing the Fed’s use of emergency liquidity measures to address crises, such as the stress in the US banking system in March last year.