Aussie Sinks on China; Gold Holds Drop With Yen After BOJ

Sydney (Nov 2)  Australia’s dollar slipped with New Zealand’s currency on slowing Chinese manufacturing growth, while gold held losses. The yen extended its drop to an almost seven-year low amid optimism the Bank of Japan’s surprise stimulus boost will fuel the economy and ward off deflation.

The Aussie lost 0.5 percent to 87.58 U.S. cents by 9:35 a.m. in Sydney, after earlier touching a one-week low, while the kiwi dropped 0.2 percent. The yen slid as much as 0.6 percent to 112.99 per dollar, its weakest level since December 2007, with Japanese markets closed for a holiday today. Gold was steady after sliding to a four-year low in its worst week in more than a year. The Standard & Poor’s 500 Index (SPX) rose to a record Oct. 31, adding 1.2 percent as U.S. Treasuries retreated.

An official gauge of Chinese factory output dropped in October, data at the weekend showed, underscoring the divergence in global economies. The BOJ’s unexpected expansion of its record stimulus program came in the same week the Federal Reserve judged the U.S. economy strong enough to end its own asset purchase plan. The BOJ’s move was predicted by just three of 32 analysts surveyed by Bloomberg and came amid projections Japan was at risk of not reaching its inflation target.

“The yen and the Aussie are being the biggest hit today after the U.S. economic reports and the BOJ easing, along with the impact on Australia of weakness in China,” Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd., said by phone from Auckland. “The more you look at both the strengthening U.S. data and what the BOJ has done the more you think that the yen has further to go.”

Split Board

The yen tumbled 2.9 percent Oct. 31 after the unexpected BOJ announcement, which saw five of nine BOJ board members -- including Governor Haruhiko Kuroda -- vote in favor of raising the annual target for enlarging the monetary base to 80 trillion yen ($710 billion), up from a range of 60 to 70 trillion yen. The currency lost 3.9 percent last week, its worst five-day slump since December 2009.

Data Oct. 30 in the U.S. showed the world’s largest economy grew an annualized 3.5 percent in the third quarter, beating the 3 percent increase in gross domestic product predicted by economists. Fewer Americans filed applications for unemployment benefits in the past month than at any time in more than 14 years, a separate report Oct. 30 showed. The Fed cited improvement in the U.S. labor market as one of its reasons for ending quantitative easing in October.

China PMI

In China, the government’s Purchasing Managers’ Index for manufacturing came in at 50.8 for October, data on Nov. 1 showed. That trailed the 51.2 median estimate of economists in a Bloomberg survey and was down from 51.1 in September. Readings above 50 indicate expansion in the sector. A similar gauge from HSBC Holdings Plc and Markit Economics is due today, along with China’s PMI for non-manufacturing industries.

The kiwi dropped to 77.77 U.S. cents after declining 0.8 percent last week. Australia and New Zealand count China as their largest trading partner. The NZX 50 Index (NZSE50FG) rose 0.2 percent today in Wellington, set for an 11th day of gains and its longest rally since March 2012.

Gold, regarded with the yen as a haven investment, was little changed on the spot market today at $1,172.96 an ounce after sinking 2.2 percent Oct. 31. The precious metal dropped 4.7 percent last week, helping it decline 2.9 percent in October for a second straight monthly loss. Gold touched $1,161.35 per ounce Oct. 31, its lowest intraday price since July 2010.

Stock Boost

Futures on Japan’s Nikkei 225 Stock Average traded on the Chicago Mercantile Exchange soared 7.9 percent to 17,025 on Oct. 31, while contracts traded in Osaka were up 2.9 percent to 16,960 by 3 a.m. local time on Nov. 1. The stock measure jumped 4.8 percent Oct. 31, helped by confirmation from Japan’s Government Pension Investment Fund that it will boost holdings of local and foreign equities to 50 percent in a bid for higher returns.

The surge in Japanese stocks fueled a 1.1 percent climb in MSCI’s Asia-Pacific index Oct. 31, as well as its All-Country World gauge of global shares. Both indexes gained at least 2.5 percent last week. Japanese markets are shut for the Culture Day holiday today.

Dubai’s benchmark index climbed 1.6 percent yesterday, the most since Oct. 26, while Abu Dhabi’s ADX General Index added 1.4 percent, the biggest one-day gain in more than three months. Equities around the globe will benefit from the shift by Japan’s GPIF, the world’s biggest pension fund, and the BOJ’s additional easing, said Sebastien Henin, who helps oversee $100 million as head of asset management at the National Investor in Abu Dhabi.

Yields Climb

The S&P 500 closed at an all-time high of 2,018.05 on Oct. 31, while the Dow Jones Industrial Average jumped 1.1 percent to surpass its previous record set Sept. 19. The Nasdaq 100 Index of technology-company shares advanced 1.4 percent to a more-than 14-year high.

In the bond market, yields on benchmark 10-year Treasury notes rose three basis points, or 0.03 percentage point, to 2.34 percent Oct. 31, capping a weekly advance of seven basis points amid declining demand for haven assets. Similar maturity Australian government bonds yielded 3.33 percent today, up four basis points.

West Texas Intermediate crude oil dropped 0.7 percent Oct. 31 to $80.54 a barrel, capping a 12 percent slide in October that marked its worst month since May 2012. Brent crude slipped 0.4 percent to $85.86 per barrel in London, with both blends entering bear markets in October amid concern global oil supplies are outpacing demand.

Source: Bloomberg