Economic Indicators & Central Banks:
- Treasury yields fell as traders anticipated Fed rate cuts due to lower-than-expected inflation data. The strong 30-year auction added to the bullish tone in Treasuries where yields have slid back toward the lows of the session.
- BoJ to scale back bond buying gradually. The BoJ left the target range for overnight interest rates unchanged at 0-0.1%. At the same time, the bank said it will reduce the purchases of government bonds over the next one to two years, against the opposition of one board member. There were no details on the timeline of the cut to debt purchases.
- Asian shares were mixed amid BoJ and as Wall Street’s AI frenzy drove indexes to new records. Chinese stocks offset the gains in Japan’s stock benchmark. In general, Asian equities are on pace for their third weekly loss in four. A stalling rally in Chinese equities and prospects the Fed will keep interest rates high for longer weighed on appetite for the region’s assets.
- The US PPI unexpectedly declined the most in 7 months, adding to evidence that inflationary pressures are moderating.
Asian & European Open:
- Wall Street is mostly higher. The NASDAQ is up 0.2% amid gains in Tesla, Nvidia, and Broadcom.
- Broadcom surged 12.3% following its report of stronger-than-expected quarterly profits, driven by high demand for AI technology. The company also increased its revenue forecast for the year.
- Tesla gained 2.9% after CEO Elon Musk announced that early voting results showed shareholders were likely to approve his pay package. Musk had warned that without approval, he might transfer AI research to one of his other companies.
- Nikkei gained 0.4% to 38,868.94 after the BoJ maintained its monetary policy but plans to reduce government bond purchases.
- ASX200 fell 0.3% to 7,724.80, Hong Kong’s Hang Seng slipped 0.6% to 18,004.71, and Shanghai Composite fell 0.1% to 3,025.39.
Financial Markets Performance:
- The USDIndex has rallied again, bouncing off of the day’s 104.642 low following the PPI and claims reports and rising to 105.209. It is still firmer against its G10 peers.
- USDJPY rose sharply to 158.24 as investors had been expecting the BoJ to show more urgency, and the announcement was seen as a delay of policy normalization. That put pressure on the Yen, which sold off across the board.
- Euro holds the week’s losses and traded at 1.0715 against USD.
- USOIL’s rally paused, on a risk-off tone in wider financial markets and more signs of robust global supply.
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Andria Pichidi
Market Analyst
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