Stock gains cool, yen rises amid Abe shock killing

Stocks in Asia pared a climb Friday and the yen strengthened after the death of former Japanese Prime Minister Shinzo Abe in a shooting injected uncertainty into a trading session earlier lifted by easing recession fears.

An Asian share index more than halved a jump of over 1 percent. The knee-jerk unease sparked by the incident also bolstered the dollar and Treasuries while sapping US and European equity futures.

Abe, 67, died in hospital. Japan, where gun violence is rare, was left stunned.

“The stock market does not like uncertainty and there is a psychological reaction occurring,” said Tetsuo Seshimo, head of the multi-manager investment division at Saison Asset Management.

Before the shooting, the possibility of 1,5 trillion yuan (US$220 billion) of stimulus in China, mostly for infrastructure, had aided sentiment. US shares had rallied Thursday as worries about an economic downturn eased a little.

The latter move came amid a rebuttal by Federal Reserve officials of market fears of a recession as monetary settings tighten. Governor Christopher Waller and St Louis Fed President James Bullard backed the need for restrictive policy to curb price pressures but argued the US can avert a contraction.

For some investors it’s far too soon to conclude that the economic and corporate earnings outlooks are out of the woods yet.

Portions of the US yield curve are inverted, stoking concerns that the threat of recession is elevated. High bond volatility also points to uncertainty. All eyes will be on the US jobs report Friday for clues about the Fed’s policy path.

“Looking nine months out, I think we’ll still have a period where we’re going to see lower corporate earnings and those lower corporate earnings are still going to give us, I would say, another 15 percent possible downside” for stocks, said Cheryl Smith, portfolio manager at Trillium Asset Management.

In company news, Elon Musk’s proposed acquisition of Twitter may fall apart over his doubts that the company is accurately reporting the number of spam bots on the service, according to a report. — Bloomberg.