Stock Gains Cool, Yen Rises Amid Shock Over Abe: Markets Wrap

(Bloomberg) -- Stocks in Asia pared a climb Friday and the yen strengthened after the shooting of former Japanese Prime Minister Shinzo Abe injected uncertainty into a trading session earlier lifted by easing recession fears.

An Asian share index halved a jump of more than 1%. The knee-jerk unease sparked by the incident also bolstered the dollar and Treasuries while sapping US and European equity futures.

Abe, 67, was left was unconscious and unresponsive after being shot in the chest. Japan, where gun violence is rare, was left stunned.

“The stock market does not like uncertainty and there is a psychological reaction occurring,” said Tetsuo Seshimo, head of the multi-manager investment division at Saison Asset Management.

Before the shooting, the possibility of 1.5 trillion yuan ($220 billion) of stimulus in China, mostly for infrastructure, had aided sentiment. US shares had rallied Thursday as worries about an economic downturn eased a little.

The latter move came amid a rebuttal by Federal Reserve officials of market fears of a recession as monetary settings tighten. Governor Christopher Waller and St. Louis Fed President James Bullard backed the need for restrictive policy to curb price pressures but argued the US can avert a contraction.

For some investors it’s far too soon to conclude that the economic and corporate earnings outlooks are out of the woods yet.

Portions of the US yield curve are inverted, stoking concerns that the threat of recession is elevated. High bond volatility also points to uncertainty. All eyes will be on the US jobs report Friday for clues about the Fed’s policy path.

“Looking nine months out, I think we’ll still have a period where we’re going to see lower corporate earnings and those lower corporate earnings are still going to give us, I would say, another 15% possible downside” for stocks, Cheryl Smith, portfolio manager at Trillium Asset Management LLC, said on Bloomberg Radio.

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What to watch this week:

• US employment report for June, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.4% as of 1:30 p.m. in Tokyo. The S&P 500 rose 1.5%
• Nasdaq 100 futures fell 0.4%. The Nasdaq 100 rose 2.2%
• Japan’s Topix index rose 0.9%
• Australia’s S&P/ASX 200 index advanced 0.6%
• South Korea’s Kospi index climbed 0.7%
• China’s Shanghai Composite index rose 0.2%
• Hong Kong’s Hang Seng index added 0.1%
• Euro Stoxx 50 futures were flat

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro was at $1.0144, down 0.2%
• The Japanese yen was at 135.61 per dollar, up 0.3%
• The offshore yuan was at 6.7068 per dollar, down 0.2%

Bonds

• The yield on 10-year Treasuries fell one basis point to 2.98%
• Australia’s 10-year bond yield rose two basis points to 3.49%

Commodities

• West Texas Intermediate crude was at $103.16 a barrel, up 0.5%
• Gold was at $1,740.56 an ounce

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