SYDNEY — Asian shares and the yen held their ground on Monday as Japanese elections proved bad for the government but no worse than already priced in, while Wall Street futures braced for earnings from the first of the tech giants.
Investors were also hoping for some progress in trade talks ahead of President Donald Trump’s August 1 tariff deadline, with US Commerce Secretary Howard Lutnick still confident a deal could be reached with the European Union.
There were reports Trump and Chinese leader Xi Jinping were closer to arranging a meeting, though likely not until October at the earliest. European Commission President Ursula von der Leyen has stolen a march and will meet with Xi on Thursday.
In Japan, the ruling coalition lost control of the upper house in an election on Sunday, further weakening Prime Minister Shigeru Ishiba’s grip on power as a tariff deadline looms.
Ishiba expressed his intention to stay in the position, which along with a market holiday, limited the reaction and the yen was 0.4 percent firmer at 148.29 to the dollar.
“Ishiba will try to govern with support from some within the opposition, but this likely means a looser fiscal policy and is not good news for bond yields,” said Rodrigo Catril, a senior FX strategist at NAB.
“History also suggests that domestic political uncertainty tends to keep the BOJ on the sidelines, so the prospect of rate hikes is now set to be delayed for a little bit longer.”
The Bank of Japan still has a bias to raise rates further but markets are pricing little chance of a move until the end of October.
While the Nikkei was shut, futures traded at 39,820 and in line with the cash close of 39,819.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1 percent, while South Korean stocks added 0.5 percent.
Chinese blue chips firmed 0.3 percent as Beijing kept interest rates unchanged as widely expected.
Mega caps kick off
EUROSTOXX 50 futures and DAX futures both dipped 0.3 percent, while FTSE futures lost 0.1 percent.
S&P 500 futures and Nasdaq futures both edged up 0.1 percent, and are already around record highs in anticipation of more solid earnings reports.
A host of companies reporting this week include Alphabet and Tesla, along with IBM.
Investors also expect upbeat news for defence groups RTX, Lockheed Martin and General Dynamics. Ramped up government spending across the globe has seen the S&P 500 aerospace and defence sector rise 30 percent this year.
In bond markets, US Treasury futures held steady having dipped late last week after Federal Reserve Governor Christopher Waller repeated his call for a rate cut this month.
Most of his colleagues, including Chair Jerome Powell, have argued a pause is warranted to judge the true inflationary impact of tariffs and markets imply almost no chance of a move in July. A September cut is put at 61 percent, rising to 80 percent for October.
