The yen traded near an nearly 3 1/2-year high against the euro and yields on 10-year government debt in Australia and Japan slid to record lows amid demand for haven assets. The Shanghai Composite Index and Japan’s Topix both sank more than three per cent, the region’s biggest losses.
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Policy meetings at the US Federal Reserve and the Bank of Japan (BoJ) in the coming week, new decisions due on possible Japanese economic stimulus measures and the Brexit vote in the United Kingdom later in June set the tone for trade in Tokyo on Monday. Voters appear divided ahead of the June 23 referendum, with the “Out” campaign widening its lead over the “In” camp, according to two opinion polls published by ICM on Monday.
Moreover, the JGBs have been closely following developments in oil markets due to their impact on inflation expectations, which are well below the Bank of Japan’s target. Australia is closed for a holiday.
Growing anxiety over the prospect of the United Kingdom exiting the European Union spooked investors worldwide, hammering equities and weakening the British pound as safe-haven demand spurred gains in the Japanese yen, sovereign debt and gold. Against the yen, it skidded 0.2 percent to 119.88 EURJPY=, moving back toward a more than three-year low plumbed in the previous session.
The currency pair traded at 105.83 Monday compared with levels around 106.80 on Friday afternoon. It was approaching its strongest against the dollar since October 2014. The yield on the 10-year securities dropped below 0.01 per cent on June 10, the lowest on record, and was 0.02 per cent on Monday.
Bold easing is necessary to put economy on track for sustainable growth and some indicators suggest a fall in bond market liquidity since the start of the year, he added.
“People are just not putting on risk at all”, said Andy Maynard, head of Asia Pacific equities at HSBC.”They prefer to sit on their hands”.
This week, the Federal Reserve is scheduled to decide on whether to further raise its interest rate, a move that has become increasingly unlikely as data announced last week showed that the USA labor market grew at its weakest pace months in seven months in April. While the bank isn’t expected to increase rates, investors are watching closely for how hawkish or dovish Chairwoman Janet Yellen’s tone will be.
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Chinese mainland oil plays were also lower, with Sinopec off by 4% and China Oilfield down 2.8%. The benchmark provider is expected to make a statement at 5 a.m. Hong Kong time Wednesday. MSCI held back from including A-shares past year.
