Treasuries Gain, Yen Fluctuates After BOJ Meeting

Stocks were mixed, while the yen fluctuated and Treasuries gained after the Bank of Japan refrained from broad changes to its ultra-loose monetary policy.

Japanese shares briefly pared declines, before ending near the day’s lows, as BOJ policy tweaks included a shift in purchases of exchange-traded funds toward assets linked to the Topix index. Equities dropped in Hong Kong, while moves were more muted elsewhere in the region. European futures edged lower. Japan’s government bonds jumped as the central bank indicated flexibility in its market operations, while the dollar steadied and U.S. equity futures ticked higher. Oil slipped below $70 a barrel.

The BOJ left its key interest rates unchanged while announcing policy tweaks, including reducing the amount of bank reserves subject to its negative interest rate and forward guidance for policy rates. In relation to the long-term rate, the BOJ reiterated that it will buy JGBs to keep the 10-year yield at about zero percent, but added language stating that “while doing so, the yields may move upward and downward to some extent mainly depending on developments in economic activity and prices."

“The allocation change in the BOJ’s ETF purchases is within the market’s expectations; as long as the BOJ maintains its annual pace of the ETF buying unchanged, the overall impact on the stock market is limited,” said Naoki Fujiwara, chief fund manager for Shinkin Asset Management Co. in Tokyo. “The BOJ maintained its targets on the yield-curve control unchanged, signaling its accommodative stance hasn’t changed.”

Investors had been speculating about whether the BOJ will fine tune its stimulus programs. Now they will look for any indications the Federal Reserve is shying away from two more interest-rate hikes before the end of this year. Meanwhile, the Bank of England is widely expected to increase borrowing costs.

Earlier, China’s manufacturing purchasing managers index — the official factory gauge — dropped to 51.2 in July from 51.5 in June and lower than the forecast of 51.3 in a Bloomberg survey of economists. Factories are faced with challenges both at home and abroad, with slower credit growth this year denting demand and the imposition of the first round of U.S. tariffs.

Elsewhere, the Canadian dollar fell on a report that the U.S. rejected attempts by Canada to take part in trade talks between the U.S. and Mexico. The Australian dollar advanced after June building approvals beat estimates.

Here are some key events coming up this week:

The U.S. Treasury is set to release its funding program for the next three months on Aug. 1.

Earnings season continues with Berkshire Hathaway, Barclays, Tesla, Toyota, BMW, and Rio Tinto among companies reporting results.

Central banks in the U.S., Japan, the U.K., Brazil and India all meet this week. The Bank of England is expected to hike even amid Brexit gloom. The Fed is seen standing pat, as is Brazil’s central bank. The RBI will probably raise its benchmark.

U.S. personal spending and income data for June — coming Tuesday — may be steady. Then it’s the jobs report on Friday, which is predicted to show a healthy labor market, with 193,000 new jobs, and an unemployment rate slipping back to 3.9 percent.

These are the main moves in markets:

Topix index decreased 0.8 percent at the 3 p.m. close in Tokyo.

Hong Kong’s Hang Seng Index dipped 0.4 percent.

Kospi index swung between gains and losses.

Australia’s S&P/ASX 200 Index rose 0.3 percent.

Futures on the S&P 500 Index increased 0.2 percent.

FTSE 100 futures fell 0.1 percent as of 7 a.m. in London.

The MSCI Asia Pacific Index fell 0.4 percent.

Currencies

The Japanese yen fell 0.2 percent to 111.26 per dollar.

The offshore yuan traded at 6.8299 per dollar.

The euro was little changed at $1.1711.

The Bloomberg Dollar Spot Index was flat.

Bonds

The yield on 10-year Treasuries sank 3 basis points to 2.94 percent.

Australia’s 10-year yield gained one basis point to 2.66 percent.

Japan’s 10-year yield decreased four basis points to 0.06 percent.

Commodities

West Texas Intermediate crude dipped 0.4 percent to $69.84 a barrel.

Gold advanced 0.1 percent to $1,222.69 an ounce.

LME copper added 0.3 percent to $6,268.00 a metric ton, the biggest gain in a week.

Source: Bloomberg