Asian stocks pause as month-end flows loom, yen weakens against euro

Asian shares took a breather from their recent rally on Thursday as investors positioned for month- and quarter-end flows, while the Japanese yen tested fresh lows against the euro and a surging Swiss franc.

Oil prices slipped, after surging over 2 per cent overnight to seven-week peaks as a surprise drop in US crude inventories added to supply worries amid export issues in Iraq, Venezuela and Russia.

S&P 500 futures and Nasdaq futures inched up 0.1 per cent ahead of a lineup of Federal Reserve officials, whose remarks will be closely watched for their views on interest rates. San Francisco Fed President Mary Daly said further rate cuts will likely be needed but the timing remained unclear.

Fed Chair Jerome Powell had struck a cautious tone about further rate cuts, after the central bank delivered the first easing this year just last week.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.2 per cent, having rallied 5.5 per cent for the month and 9 per cent for the quarter. Japan's Nikkei rose 0.1 per cent, after jumping 7 per cent for the month and 13 per cent for the quarter.

Chinese blue chips were flat, while Hong Kong's Hang Seng slipped 0.2 per cent.

"Depending on whether funds are mandated to rebalance monthly or quarterly, the rebalancing flows should result in selling in US and Japanese indices," said Tony Sycamore, analyst at IG.

"While the German and Australian stock markets are likely to be the beneficiaries of rebalancing buying."

Overnight, Wall Street closed lower for a second straight session as investors booked profits from record-high stocks. Futures still imply a 92 per cent chance for a rate cut from the Fed in October, but the total expected easing has faded to 100 bps, from 125 bps a few weeks ago.

Next up, the spotlight will be on US economic data, including the Fed's preferred gauge of inflation, the Personal Consumption Expenditures report on Friday and the final estimate for second-quarter GDP on Thursday, while the prospect of a government shutdown looms large.

The Treasuries market see-sawed as markets absorbed a huge amount of higher corporate and government bond supply. The benchmark US 10-year Treasury note yield was flat at 4.1408 per cent, having risen 3 basis points overnight, reversing Monday's fall.

The Treasury Department will auction $44 billion in seven-year notes on Thursday, following auctions of five-year and two-year notes earlier in the week.

In foreign exchange markets, the dollar slipped 0.1 per cent to 148.77 yen, having gained 0.9 per cent overnight.

The yen was the biggest loser overnight, hitting an over one-year low on the euro at 174.78, just above a record low of 175.9. It also hit an all-time trough on the Swiss franc at 187.30 yen.

The Swiss National Bank is expected to hold its policy rate at zero later in the day, its first pause since late 2023.

In commodity markets, spot gold prices were flat at $3,739 an ounce, having slipped 0.7 per cent overnight in the face of a strong dollar.

US crude slipped 0.4 per cent to $64.73 a barrel, while Brent was off 0.3 per cent at $69.11.

"Brent oil futures have continued to find support in the $65-70/bbl range despite market forecasts of a deep oversupply in Q4 2025 and Q1 2026," said Vivek Dhar, a commodities strategist at the Commonwealth Bank of Australia.

Dhar added there is a slight upside risk to his call for a further drop in Brent prices to $60 a barrel next quarter.