A stronger yen weighed on Japanese shares Tuesday, setting a cautious tone for trading in the Asia-Pacific region, though markets pared early declines by late morning.
The Nikkei Stock Average
had been down as much as 0.6% after the yen gained against the U.S. dollar on haven buying. However, the decline narrowed to 0.1% by early afternoon.
pair was down 0.3% at ¥110.87, hovering around last week’s levels and stronger than the ¥111.28 level at Monday’s close.
A rise in risk aversion prompted the buying of the yen amid selling of other major currencies including the euro and the pound, analysts said.
Uncertainty in the market was being fueled by reports of problems with the Greek bailout package, as well as British polls suggesting Prime Minister Theresa May’s Conservative Party has less of a lead over the rival Labour Party than expected, said AxiTrader Chief Market Strategist Greg McKenna.
“That combination has increased risk aversion a little which has put upward pressure on gold and downward pressure on the dollar-yen pair,” he said.
The Australian dollar
was down 0.2% against the U.S. dollar, while gold
fell by 40 cents to $1267.70 a troy ounce after rising for most of the early trading session in Asia.
The yen’s rise came despite a string of strong data releases in Japan on Tuesday. The jobs-to-applicants ratio in April hit its highest level in more than 43 years, a sign of a strengthening labor market. The jobless rate remained unchanged at 2.8% for the month, in line with a consensus figure from a Nikkei poll of economists.
The country’s retail sales value rose 3.2% in April from a year earlier, rising for the sixth month in a row, as sales of automobiles and textiles improved. That followed a 2.1% increase in March.
The higher yen set the tone for a cautious trading in the region in the absence of major cues from global trading centers; markets in the U.K. and U.S. were shut Monday. A stronger yen weighs on the profits of Japanese exporters.
“Traders seem to be taking a defensive stance in what looks like a big data week with a lot of news,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. “The key is what happens to the U.S. dollar and Japanese markets in particular.”
In the U.S., data on consumer confidence and personal income and spending are due this week, as is the closely watched monthly jobs report.
Disappointing data from the U.S. could indicate a negative demand outlook for global growth, which could hurt sentiment world-wide, he said. The resulting stronger yen could further hurt Japanese shares, Spooner said.
Stocks of Japanese manufacturing and automobile giants were down by about 0.5%. Insurers are experiencing selling as well, as yields on the benchmark 10-year U.S. Treasury fell to 2.23% from 2.25% on Friday. Japanese insurance companies are major holders of U.S. government paper.
Elsewhere in the region, Australia’s S&P/ASX 200
recovered from early declines to move into positive territory following bargain buys of bank stocks. National Australia Bank
was up 1% and Macquarie
and Commonwealth Bank
both rose 0.6%. Resources stocks also gained, with index heavyweights BHP Billiton
and Rio Tinto
up 0.6% and 0.9%, respectively, and Fortescue Metals
In South Korea, the benchmark Kospi
was down 0.4%, paring midmorning losses after opening on solid footing. The country’s shares Monday snapped a six-day winning streak after North Korea’s latest missile launch, though the index still recorded its second-highest close to date.
Still, tourism-related stocks that were hit Monday by the North Korean worries rebounded, with Asiana Airlines
gaining 0.8%, Korean Air
up 1.3%, and Lotte Shopping
rising 3.2%. Export-reliant Hyundai Motor
Markets in mainland China, Hong Kong and Taiwan were shut for the Dragon Boat Festival.