European Stock Futures Steady as Yen Whipsaws: Markets Wrap

(Bloomberg) — European stocks are set for a muted start after Asian equities slumped on the back of a rout in technology stocks. The yen was volatile.

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The Euro Stoxx 50 futures were little changed, tracking similar cues from contracts for US stocks, which stabilized after a tech-induced selloff on Thursday.

A gauge of Asian tech stocks fell as much as 3.6%, with losses concentrated in Japan, South Korea and Taiwan. That came after Nasdaq 100 dropped 2.2% as inflation data supported the case for rate cuts, fueling an exit from the long-favored safety trade of tech megacaps.

Despite the latest setback, global stocks are set for their sixth weekly advance, the longest stretch since March, as Fed easing bets aid overall risk sentiment. The US inflation data sent traders to fully price in rate cuts in September.

The yen whipsawed Friday as the Bank of Japan conducted so-called rate checks with traders, reinforcing perceptions that authorities intervened in the market on Thursday to prop up the currency.

“Now they’ve shown their hand and they’ve intervened, they kind of have to continue to intervene just to maintain the credibility of that intervention,” Adarsh Sinha, co-head of Asia FX & Rates strategy at BofA Securities, said on Bloomberg Television regarding Japan’s finance ministry. “It’s still a tough task.”

The regional equity benchmark was headed for its worst day in nearly six weeks as Japanese and Korean shares slumped. Stocks rose in Hong Kong and Australia.

“We are seeing rotation out of the more tech-centric markets such as Taiwan and Korea, driven by the overnight US Tech selldown,” said Gary Tan, a portfolio manager at Allspring Global Investments.

Chinese equities trading in Hong Kong were on pace for their best day in three weeks, supported by some expectations of policy support from the upcoming Third Plenum on the mainland. A gauge of Chinese property developers jumped as much as 6.3%.

“If the shift to value is intact, Chinese equities may potentially see some support,” said Jun Rong Yeap, market strategist at IG Asia Pte. Couple that “with more curbs on short-selling activities lately, which offer room for prevailing bearish sentiments to unwind,” he said.

Treasury yields were steady after the prospect of lower US interest rates had sent 10-year yields seven basis points lower to 4.21% in the prior session. Australian and New Zealand government bonds rallied taking cues from their US peer.

A gauge of the dollar was steady after falling Thursday by the largest margin since May.

Fed Bank of Chicago President Austan Goolsbee described the CPI data as “excellent,” saying the report provided the evidence he’s been waiting for to be confident the central bank is on a path to its 2% goal.

To Chris Larkin at E*Trade from Morgan Stanley, Thursday’s “Fed-friendly CPI” was another step toward a September rate cut. A lingering question is whether this high-flying stock market has already priced in multiple cuts, he noted.

In key Asia data, China’s trade surplus soared to the highest since at least 1990 in June, as exports jumped more than expected while imports unexpectedly weakened. Other reports due Friday include Japan industrial output and Indian inflation. China money supply and new loans data may also be released as soon as Friday.

In Europe, Ericsson AB earnings beat analysts’ expectations in the second quarter, helped by cost cutting measures to counter what the Swedish company called a “challenging market environment.”

West Texas Intermediate oil rose for a third day Friday, helped along by the CPI. Gold fell after a sharp rally on Thursday.

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