Gold Extends Rout With Yen on BOJ; China PMI Sinks Aussie

Tokyo-Japan (Nov 3)  Gold slid with the yen amid a selloff in haven assets as the Bank of Japan’s surprise stimulus boost bolstered the global outlook. Australia’s dollar slipped with copper futures on slowing Chinese manufacturing growth.

Gold fell 0.7 percent to $1,164.94 an ounce in the spot market by 8:36 a.m. in Tokyo, trading close to the four-year low reached Oct. 31. 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. The Aussie dropped to a one-week low and the kiwi retreated 0.2 percent, as copper futures fell 0.3 percent. Australia’s S&P/ASX 200 Index rose 0.1 percent, while Standard & Poor’s 500 Index futures were down 0.1 percent after the gauge rose to a fresh record Oct. 31.

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.”

Yen, Gold

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.

Gold extended declines today after sliding 2.2 percent Oct. 31 and touching $1,161.35, its lowest intraday price since July 2010. The precious metal dropped 4.7 percent last week, helping it decline 2.9 percent in October for a second straight monthly loss. Silver slipped 1.2 percent today to $15.9618 an ounce, after reaching its lowest level since February 2010 in the Oct. 31 session.

U.S. Economy

Data last week 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.

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 Aussie lost 0.5 percent to 87.57 U.S. cents after earlier reaching 87.33, the lowest level since Oct. 24. The kiwi dropped 0.2 percent to 77.77 U.S. cents following last week’s 0.8 percent decline. Australia and New Zealand count China as their largest trading partner. The NZX 50 Index (NZSE50FG) rose 0.3 percent today in Wellington, set for an 11th day of gains and its longest rally since March 2012.

Nikkei Futures

Futures on Japan’s Nikkei 225 Stock Average traded on the Chicago Mercantile Exchange added 0.1 percent after soaring 7.9 percent Oct. 31. 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.

Rising Yields

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 3.32 percent today, up four basis points.

West Texas Intermediate crude oil was down 0.1 percent to $80.48 a barrel in a third day of declines. WTI capped a 12 percent slide in October for its worst month since May 2012. Brent crude was little changed at $85.88 a barrel after slipping 0.4 percent Oct. 31. Both blends entered bear markets in October amid concern global oil supplies are outpacing demand.

Source:  Bloomberg