[WELLINGTON] A sense of unease lingered in financial markets as trading got under way for the week, with the yen strengthening and Asian index futures signaling losses ahead of key events that could be catalysts for further turbulence. Crude oil slid.
Japan's currency climbed with gold early Monday as traders favored haven assets ahead of a week where Chinese data on factory output and retail sales will be followed by meetings of the Federal Reserve and the Bank of Japan.
Equity-index futures from South Korea to Hong Kong foreshadowed declines after a gauge of global shares slid the most in more than four months. The pound slid to the lowest level in almost two months after a poll showing a 10 percentage-point lead for Britain to leave the European Union sent it tumbling late on Friday. Crude extended losses amid an increase in US drilling rigs.
Optimism that had fueled a rally in risk assets appears to have peaked, as traders brace for a series of events in June that could reverberate in markets for the rest of the year.
The central bank meetings, British referendum and US political party conventions are looming just as concerns over the health of the global economy reemerge amid lackluster corporate profits. Ten-year Treasury yields slid to their lowest closing level since the end of 2012 on Friday as the event risk spurred investors to seek out the haven of US debt.
"The market hates uncertainty," Yoshinori Ogawa, a markets strategist at Okasan Securities Co in Tokyo, said by phone. "Most market participants think that the UK will probably remain, but we're seeing some poll results that show those who'll vote to leave outnumber the 'Remain' camp, and this is making investors uncertain."
The pound shed another 0.6 per cent to US$1.4174 as of 8:46 am Tokyo time, after touching US$1.4165, its weakest level since April 18. The 1.4 per cent selloff late on Friday was triggered by an Orb/Independent newspaper poll showing 55 per cent support for the "Leave" campaign, and 45 per cent for "Remain."
The pound lost 0.5 per cent versus the euro Monday, following a 0.8 per cent decline.
Surveys at the weekend were less stark, with an online poll by Opinium for the Observer newspaper showing 44 per cent support for Britain remaining in the 28-nation bloc, up from 43 per cent a week ago. Some 42 per cent of respondents backed leaving the EU, also up 1 point from the poll released on June 4.
A YouGov online survey published in the Sunday Times showed 43 per cent backed leaving, up one per centage point from a June 7 poll, and 42 per cent favored remaining, unchanged from a week earlier.
The yen, which typically moves at odds with Japanese shares, benefited from the drop in risk appetite, rising 0.5 per cent to 106.46 per dollar following a 0.1 per cent increase on Friday. The currency snapped a four-week retreat last week as the optimism that buoyed markets through May started to ebb.
"The international focus on Brexit has stepped up," Cameron Bagrie, chief economist in Wellington at ANZ Bank New Zealand Ltd, said in a client note. "Yay or nay is only part of the issue - what we are seeing globally is more kickback from society toward integration and more anti-globalization. The politics associated with close votes are not good for mandates and driving good macroeconomic policy."
The BOJ should expand monetary stimulus as soon as this week by boosting bond purchases rather than pushing interest rates further into negative territory, Nobuyuki Nakahara, an influential adviser to Prime Minister Shinzo Abe, said in an interview on Friday. The majority of economists surveyed by Bloomberg expect the central bank to remain on hold on Thursday.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, added 0.1 per cent after rising 1.1 per cent over the previous two sessions.
Odds of an increase in US key rates don't exceed 50 per cent before December, according to Fed funds futures tracked by Bloomberg. There is zero chance of a move this week, the data shows.
New Zealand's S&P/NZX 50 Index, the first major equity index to start trading each day, slipped 0.4 per cent after capping its worst weekly loss since mid-February on Friday. Futures on the S&P 500 Index declined 0.2 per cent to 2,082.75 early Monday, following a 0.9 per cent slump in the US benchmark last session, its steepest drop since May 17.
Yen-denominated futures on Japan's Nikkei 225 Stock Average declined 0.4 per cent to 16,220 on the Chicago Mercantile Exchange, after sinking 1.8 per cent on Friday. Nikkei 225 contracts were bid down 1.8 per cent in the Osaka pre-market, to 16,230, while futures on the Japanese index traded in Singapore lost 1.7 per cent to 16,220.
Futures on the Kospi index in Seoul dropped 0.6 per cent at the end of last week, while those on Hong Kong's Hang Seng and Hang Seng China Enterprises indexes slipped 0.7 per cent. Markets in Australia are closed Monday for a holiday.
As well as the industrial production and retail trade data, China may also publish figures on foreign investment, money supply and lending Monday. India reports on consumer prices as investors start counting down to Wednesday's post-meeting statement from the Fed and Thursday's policy review from the BOJ.