TOKYO: Japanese stocks edged towards two-year highs on Tuesday as exporters benefited from dollar strength, with investors expecting comments from Federal Reserve Chair Janet Yellen to support the Fed’s projection for one more interest rate rise this year.
Stalling auto stocks and a weak travel and leisure sector weighed on Britain’s FTSE, while updates from Carpetright and Debenhams gave conflicting pictures of the health of British consumers as inflationary pressures start to bite.
The FTSE 100 was down 0.4 per cent by 0820 GMT, erasing all the previous session’s gains, with the top weights GKN, Marks & Spencer and TUI.
A profit warning by German’s Schaeffler, which sent its shares spiralling down 12 per cent, also weighed on British car parts supplier GKN, as carmakers across Europe slid 1.5 per cent.
“While we were braced for GKN to have a tougher second quarter after a strong first quarter, we suspect Schaeffler’s mention of pricing pressure will still send a shiver down the spine of most observers,” say Jefferies analysts.
They added, however, that they hesitated to make a direct read-across to GKN. Travel and leisure stocks were among the worst performers, with tour operator TUI down 2.3 per cent after Barclays cut its target price on the stock. A downgrade to sell from Investec weighed on gambling company William Hill on the mid-caps as well.
Strength among miners lent the FTSE a helping hand, pushing it slightly ahead of European peers.
Anglo American, Rio Tinto, Antofagasta, BHP Billiton and Glencore were the top gainers.
Yellen is scheduled to take part in a discussion on global economic issues at the British Academy in London and a number of other top Fed officials are also due to speak later in the global day.
Japan’s benchmark Nikkei was last up 0.3 per cent at 20,210.09 in subdued trading. A rise above 20,318.11, a peak scaled a week ago, would take the Nikkei to its highest since August 2015.
“The fundamental mood is not bad, but it’s hard for investors to find direction on a day where there are no other major catalysts other than a weak yen,” said Hikaru Sato, a senior technical analyst at Daiwa Securities in Tokyo.
Despite lower Treasury yields, the dollar extended overnight gains and was firm at 111.800 yen after briefly rising to a one-month peak of 112.075.
Long-dated Treasury yields dropped to seven-month lows on Monday and the yield curve between five-year notes and 30-year bonds fell to its flattest level since 2007 after the weak US durable goods orders raised concerns about tepid growth and slowing inflation.
The euro was steady at $1.1189 having fallen back from an 11-day high of $1.1220 overnight after European Central Bank President Mario Draghi defended the central bank’s easy monetary policy.
Otherwise, Asian markets lacked strong direction as Wall Street provided few catalysts after the S&P 500 and the Dow closed overnight effectively flat.
MSCI’s broadest index of Asia-Pacific shares outside Japan stood little changed. Having made record highs during the past two months on expectations that exporters will post strong earnings, South Korea’s KOSPI rose a further 0.3 per cent.
Elsewhere, Shanghai’s benchmark index and Australian shares were both down 0.1 per cent.
There was also a general sense of caution in financial markets, analysts said, noting that commodities like crude oil, which is suffering from a glut, remained shaky though a recent selloff has stalled.