Day: October 31, 2023

Asian equities slid on Tuesday as disappointing activity data from China revived some worries over the world’s second-largest economy, while the yen weakened past 150 per dollar after the Bank of Japan tweaked its bond yield control policy.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was 0.86% lower, hovering close to the one-year low it touched last week. The index is down 4% in October and on course for third straight month in the red.

The yen fell 0.8% against the dollar to touch a session low of 150.25 after the central bank said the 1% ceiling on benchmark 10-year yields would be an upper bound rather than a rigid cap. It maintained the 0% target for the yield under its yield curve control (YCC) policy.

Under criticism that its heavy defence of the cap is causing market distortions and an unwelcome yen fall, BOJ had raised its de-facto ceiling for the yield to 1.0% from 0.5% in July.

Analysts viewed the move by the central bank on Tuesday as a small step towards dismantling the long-running and controversial YCC policy.

“The BOJ apparently feared that sticking to 1% would force the Bank to purchase a large amount of government bonds and further weaken the yen,” said Hirofumi Suzuki, chief FX strategist at Sumitomo Mitsui Banking Corporation.

“As a result, the YCC framework seems to have become more of a dead letter.”

A report from the Nikkei newspaper on Monday that said BOJ is considering adjusting its yield curve control policy helped push the yen to a two-week peak of 148.81 per dollar but the fragile currency gave up all its gains after the BOJ decision.

Nicholas Chia, macro strategist at Standard Chartered, said most of the “good news” were already in the price, after the Nikkei report.

“The immediate price action in dollar/yen suggests that markets were disappointed by the tweak and the absence of a new ceiling – gives the impression the BOJ will massage the run up in yields going forward.”

The yield on 10-year JGB eased a bit following the announcement but remained at decade-high levels.

The central bank, which maintained its ultra-loose monetary policy, also removed a pledge to defend the 1% level with offers to buy unlimited amount of bonds.

Data on Tuesday showed that manufacturing activity unexpectedly returned to contraction in October, casting a cloud over recent indicators that showed a nascent recovery in China.

The Shanghai Composite Index (.SSEC) fell 0.37% lower, while Hong Kong’s Hang Seng Index (.HSI) sank 1.85% after the data.

Nomura analysts said it was still too early to call the bottom, noting that they expect economic conditions to remain poor or even deteriorate further in coming months.

Futures indicated stocks in Europe were set for a subdued open, with the Eurostoxx 50 futures down 0.15%, German DAX futures down 0.05% and FTSE futures 0.08% lower ahead of inflation data for euro zone.

Investor focus this week will mainly be on the major central bank meetings, with the U.S. Federal Reserve and Bank of England also due to meet.

Later on Tuesday, the Federal Open Markets Committee (FOMC) will convene for a two-day monetary policy meeting, which is expected to culminate in a decision to let the Fed funds target rate stand at 5.25%-5.50%.

A slew of recent data showed the U.S. economy remains resilient and comments from Fed Chair Jerome Powell will be scrutinized to gauge how long interest rates are likely to stay elevated.

The Treasury Department said on Monday it expects to borrow $76 billion less this quarter than anticipated in the third quarter on expectations of higher revenue receipts.

The yield on 10-year Treasury notes was up 0.9 basis points at 4.886%.

The dollar index , which measures U.S. currency against six rivals, rose 0.16%. Sterling was last at $1.2147, down 0.17% on the day, while the euro was down 0.08% at $1.0605.

In commodities, oil prices rose in Asian trade after a drop of more than 3% in the previous session, as worries over supply stirred by conflict in the Middle East blunted a dismal showing of China data.

U.S. crude rose 0.68% to $82.87 per barrel and Brent was at $88.10, up 0.74% on the day.

Spot gold eased 0.2% to $1,991.39 after slipping below the $2,000/ounce milestone in the previous session.

Israel said on Tuesday its forces attacked Hamas gunmen inside the Islamists’ vast tunnel network beneath Gaza, after Prime Minister Benjamin Netanyahu dismissed calls for a halt to fighting to ease the Palestinian enclave’s humanitarian crisis.

The tunnels are a key objective for Israel as it expands ground operations inside Gaza to wipe out the ruling Hamas movement following its gun rampage three weeks ago that Israeli authorities say killed over 1,400 people.

“Over the last day, combined IDF combat forces struck approximately 300 targets, including anti-tank missile and rocket launch posts below shafts, as well as military compounds inside underground tunnels belonging to the Hamas terrorist organization,” the Israel Defernce Forces (IDF) said in a statement.

Militants responded with anti-tank missiles and machine gun fire, it added.

“The soldiers killed terrorists and directed air forces to real-time strikes on targets and terror infrastructure,” the IDF said.

Witnesses said Israeli forces targeted Gaza’s main north-south road on Monday and attacked Gaza City from two directions. Israel said its troops freed a soldier from Hamas captivity.

Hamas, an armed Islamist group that governs Gaza, has so far released four civilians from the 239 hostages Israel says were captured on Oct. 7. Many of the hostages are believed to held in the Hamas tunnel network.

The al-Qassam brigades, Hamas’ armed wing, said militants clashed early on Tuesday with Israeli forces “invading the southern Gaza axis, (including) with machine guns, and targeted four vehicles with al-Yassin 105 missiles,” referring to locally produced anti-tank missiles.

The militants also targeted two Israeli tanks and bulldozers in northwest Gaza with the missiles, al-Qassam said.

Reuters was not able to confirm the reports of fighting. Israel’s military had no immediate comment.

Gaza health authorities say that 8,306 people, including 3,457 minors, have been killed in Israeli attacks since Oct. 7. U.N. officials say more than 1.4 million of Gaza’s civilian population of about 2.3 million have been made homeless.

The mounting death toll has drawn calls from the U.S., Israel’s top ally, other countries and the U.N. for a pause in fighting to allow more humanitarian aid to reach the enclave.

Netanyahu said late on Monday that Israel would not agree to a cessation of hostilities with Hamas in Gaza and would press ahead with its plans to wipe out the group.

“Calls for a ceasefire are calls for Israel to surrender to Hamas, to surrender to terrorism, to surrender to barbarism. That will not happen,” Netanyahu said in televised remarks.

Military specialists said Israeli forces are moving slowly in their ground offensive in part to keep open the possibility that Hamas militants will negotiate the release of the hostages.

The relative caution with which Israeli troops have taken and secured slices of territory in the first days of sustained ground operations in Gaza stands in contrast to the past three weeks of unrelenting air strikes on the Mediterranean enclave, as well as to Israel’s previous land offensives there.

Israel’s military said it struck more than 600 militant targets in recent days in Gaza, where Palestinian civilians are in dire need of fuel, food and clean water.

The U.N. humanitarian office (OCHA) said that water supply through a pipeline from Israel to southern Gaza was cut off on Monday “for unknown reasons”, and that an announced repair of another pipeline to central Gaza did not take place.

“At the time of writing, no water is provided to Gaza from Israel,” OCHA said on its website.

Significantly fewer humanitarian aid trucks have reached the besieged enclave than are required, U.N. officials said, and civil order has broken down with people storming U.N. warehouses in search of food.

That has put four U.N. aid distribution centres and a storage facility out of action, the United Nations agency for Palestinian refugees (UNRWA) said on Monday.

“It’s a disaster on top of a disaster. Health needs are soaring and our ability to meet those needs is rapidly declining,” World Health Organization regional emergencies chief Rick Brennan said, reiterating international calls for a ceasefire to enable a larger humanitarian operation.

Aid trucks have been trickling into Gaza from Egypt over the past week via Rafah, the main crossing that does not border Israel. It has become the main point of aid delivery since Israel imposed a “total siege” of Gaza after Oct. 7.

The White House said it was working to get more aid trucks into Gaza.

Hamas released a video on Monday that showed three hostages seized by the Islamist movement on Oct. 7.

The women – identified by Netanyahu as Yelena Trupanob, Danielle Aloni and Rimon Kirsht – sat side by side against a bare wall, and Aloni addressed an angry message to the prime minister.

Netanyahu condemned the video as “cruel psychological propaganda” and said Israel’s ground campaign created possibilities for rescuing the hostages.

The conflict has led to demonstrations worldwide in support of the Palestinians, and antisemitic and Islamophobic harassment.

Biden administration officials, voicing alarm at reports of anti-Jewish incidents at U.S. universities, met American Jewish leaders on Monday to discuss steps to counter the surge, a White House official said.

In Russia, President Vladimir Putin accused the West and Ukraine of stirring up unrest inside Russia after rioters in the predominantly Muslim Dagestan region stormed an airport to “catch” Jewish passengers on a flight from Tel Aviv.

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