Audio By Carbonatix
Oil prices skidded, and stocks wobbled on Monday as hopes of peace in the Middle East grew, while the yen jumped suddenly after the U.S. and Japan confirmed joint intervention to prop up the frail currency.
Brent crude futures sank more than 6% to $82.41 after U.S. President Donald Trump said talks with Iran will happen on Monday. He had earlier called off an imminent attack on Iran to reach a deal to reopen the Strait of Hormuz and resolve the impasse over Tehran's nuclear capabilities.
S&P 500 futures rose 0.4% while Nasdaq futures gained 0.6%. But Japan's Nikkei (.N225), opens new tab dipped 1% and South Korea's KOSPI (.KS11), opens new tab slid 3.6% after a turbulent July in which it slumped 22%.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MISX00000PUS), opens new tab was down 1% in early trading.
The Japanese yen rose more than 1% to 155.39 per U.S. dollar in a sudden move that put traders on alert for another bout of intervention.
Japan and the U.S. conducted coordinated yen-buying intervention and will not hesitate to take further action, Japan's finance ministry said on Monday, confirming a rare bilateral action to halt the yen's slide to fresh 40-year lows.
Mizuho Bank strategist Masayuki Nakajima said the objective was likely not to reverse the broader trend of dollar/yen as structural forces remain broadly yen-negative, including persistent U.S.-Japan interest-rate differentials.
"It is difficult to argue that the secular depreciation trend in the yen has fundamentally changed. In the near term, however, the momentum may shift in favour of yen appreciation, as the tone of recent U.S.‑Japan communication carries a pointed warning to speculative traders," Nakajima said.
Preceding the announcement, Trump said on Sunday the United States was helping Japan to prop up the yen as a sign of friendship and to help the world economy.
"They have a weakening yen, and they wanted a little bit of help. And we're always there for Japan," Trump said in response to a reporter's query about why the U.S. is helping to support the yen.
Nick Twidale, chief market strategist at ATFX Global, said comments from Trump that it is basically a 'friendship trade' take away credibility from the U.S. participation.
"They are pushing against the fundamentals so I expect the market to eventually correct the move once the intervention has finished, unless we do see a change in the underlying factors," Twidale said.
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