Tag: EURUSD

Hang Seng leads selloff for Asia stocks, with 4% slump after China data

TOKYO (AP) — Asian shares slid Wednesday after a decline overnight on Wall Street and disappointing China growth data, while Tokyo’s main benchmark momentarily hit another 30-year high.

Japan’s benchmark Nikkei 225
NIY00,
-0.95%
reached a session high of 36,239.22, but reverted lower, last down 0.3% to 35,477. The Nikkei has been hitting new 34-year highs, or the best since February 1990 during the so-called financial bubble. Buying focused on semiconductor-related shares, and a cheap yen helped boost exporter issues.

Don’t miss: Wall Street firms catch up to Buffett enthusiasm on Japan as Nikkei keeps hitting records

Hong Kong’s Hang Seng
HK:HSCI
tumbled 4% to 15,220.72, with losses building after data showed China hitting its economic growth target of 5.2% for 2023, surpassing government expectations, but short of the 5.3% some analysts expected. The Shanghai Composite
CN:SHCOMP
shed 2% to 2,833.62.

Read on: China hit its economic-growth target without ‘massive stimulus,’ boasts Premier Li Qiang

Australia’s S&P/ASX 200
AU:ASX10000
slipped 0.2% to 7,401.30. South Korea’s Kospi
KR:180721
dropped 2.4% to 2,435.90.

Investors were keeping their eyes on upcoming earnings reports, as well as potential moves by the world’s central banks, to gauge their next moves.
Wall Street slipped in a lackluster return to trading following a three-day holiday weekend.

See: What’s next for stocks as ‘tired’ market stalls in 2024 ahead of closely watched retail sales

The S&P 500
SPX
fell 17.85 points, or 0.4%, to 4,765.98. The Dow Jones Industrial Average
DJIA
dropped 231.86, or 0.6%, to 37,361.12, and the Nasdaq
COMP
sank 28.41, or 0.2%, to 14,944.35.

Spirit Airlines
SAVE,
-47.09%
lost 47.1% after a U.S. judge blocked its takeover by JetBlue Airways
JBLU,
+4.91%
on concerns it would mean higher airfares for flyers. JetBlue rose 4.9%.

Stocks of banks were mixed, meanwhile, as earnings reporting season ramps up for the final three months of 2023. Morgan Stanley
MS,
-4.16%
sank 4.2% after it said a legal matter and a special assessment knocked $535 million off its pretax earnings, while Goldman Sachs
GS,
+0.71%
edged 0.7% higher after reporting results that topped Wall Street’s forecasts.

Companies across the S&P 500 are likely to report meager growth in profits for the fourth quarter from a year earlier, if any, if Wall Street analysts’ forecasts are to be believed. Earnings have been under pressure for more than a year because of rising costs amid high inflation.

But optimism is higher for 2024, where analysts are forecasting a strong 11.8% growth in earnings per share for S&P 500 companies, according to FactSet. That, plus expectations for several cuts to interest rates by the Federal Reserve this year, have helped the S&P 500 rally to 10 winning weeks in the last 11. The index remains within 0.6% of its all-time high set two years ago.

Treasury yields
BX:TMUBMUSD10Y
have already sunk on expectations for upcoming cuts to interest rates, which traders believe could begin as early as March. It’s a sharp turnaround from the past couple years, when the Federal Reserve was hiking rates drastically in hopes of getting high inflation under control.

The Tell: No rate cuts in 2024? Why investors should think about the ‘unthinkable.’

Easier rates and yields relax the pressure on the economy and financial system, while also boosting prices for investments. And for the past six months, interest rates have been the main force moving the stock market, according to Michael Wilson, strategist at Morgan Stanley.

He sees that dynamic continuing in the near term, with the “bond market still in charge.”

For now, traders are penciling in many more cuts to rates through 2024 than the Fed itself has indicated. That raises the potential for big market swings around each speech by a Fed official or economic report.

Yields rose in the bond market after Fed governor Christopher Waller said in a speech that “policy is set properly” on interest rates. Following the speech, traders pushed some bets for the Fed’s first cut to rates to happen in May instead of March.

On Wall Street, Boeing fell to one of the market’s sharper losses as worries continue about troubles for its 737 Max 9 aircraft following the recent in-flight blowout of an Alaska Air
ALK,
-2.13%
jet. Boeing
BA,
-7.89%
lost 7.9%.

In energy trading, benchmark U.S. crude
CL00,
-1.55%
lost 90 cents to $71.75 a barrel. Brent crude
BRN00,
-1.37%,
the international standard, fell 78 cents to $77.68 a barrel.

In currency trading, the U.S. dollar
USDJPY,
+0.44%
rose to 147.90 Japanese yen from 147.09 yen. The euro
EURUSD,
-0.10%
cost $1.0868, down from $1.0880.

MarketWatch contributed to this report

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January 16, 2024
U.S. dollar defies China, Russia and Wall Street skeptics as 2023 rebound continues

The U.S. dollar is proving its haters wrong.

Not only is the buck defying the expectations of Wall Street strategists who had anticipated that it would weaken this year, it’s also proving once again that talk of de-dollarization has been over-hyped.

In financial markets, a gauge of the dollar’s value against its biggest rivals is nearing its highest level in six months. The ICE U.S. Dollar Index
DXY,
a gauge of the dollar’s strength against the euro
EURUSD,
-0.01%
and other major currencies like the Japanese yen
USDJPY,
-0.09%
and British pound
GBPUSD,
+0.21%,
traded at its highest level since early June on Friday after Federal Reserve Chairman Jerome Powell helped catapult it higher by talking up the possibility of more interest-rate hikes.

The index was adding to those gains on Monday, trading 0.1% higher at 104.13, according to FactSet data. A break above 104.70 would put it at its highest intraday level since March 16. The index is up 0.5% since the start of the year, having erased earlier year-to-date losses over the past six weeks.

Earlier this year, dollar weakness occurred against the backdrop of U.S. rivals like China and Russia making strides in their efforts to wean themselves off the buck.

But despite their efforts, data released last week by SWIFT, the nexus of international interbank financial transactions, showed that the dollar has never been more popular as a means of settling international trade and transactions.

SWIFT’s data showed that 46% of interbank payments conducted on the platform in July involved the U.S. dollar, a record high. The data also showed that the Chinese yuan’s share of international payments had ticked higher while the euro’s declined.

As if to underscore this point, the data from SWIFT arrived late last week just as a summit hosted by the BRICS nations in Johannesburg, South Africa, was breaking up.

Rather than being a watershed event for opponents of the U.S. dollar, as some had feared, statements from the group’s members revealed internal disagreement on the subject of a BRICS currency intended to offer an alternative to the greenback.

What’s more, while the economic alliance announced plans to admit a spate of new member nations in its first expansion in 13 years, one notable holdout seemed to spoil the party.

Indonesian President Joko Widodo opted to keep his country, one of the world’s most populous, with a fast-expanding economy, out of the economic alliance, at least for now.

To be sure, as MarketWatch reported back in April, talk of de-dollarization is hardly a new phenomenon, but it has received renewed attention as China, Russia and others have redoubled efforts to try and push for countries to conduct more trade in their own currencies as opposed to the dollar.

But Russia and China aren’t alone in their disappointment at the dollar’s resilience.

Read more: Opinion: China is nowhere near deflation, and global investors aren’t ready for what’s coming

A compilation of 2023 year-ahead outlooks produced by Bloomberg News back in December showed investment houses in Europe and the U.S. widely expected the buck to weaken this year, with some reasoning that the two-decade high reached by the dollar index in late September likely marked its peak for the cycle.

The ICE index traded as high as 114.78 on Sept. 28, its highest level since May 2002, according to FactSet data. The milestone marked the peak of a torrid rally that saw the buck emerge as one of the few havens from a punishing selloff in stocks and bonds that defined global markets in 2022. But the gauge has fallen 9.3% since then.

Now, with real yields in the U.S. pushing higher and Federal Reserve Chairman Jerome Powell hinting at the possibility of more interest-rate hikes later this year, strategists say the conditions are ideal for the U.S. dollar to climb even higher.

“Interest-rate differentials and relative economic strength are the foundation [of dollar strength],” Matt Miskin, co-chief investment strategist for John Hancock Investment Management, said during a phone interview with MarketWatch.

China’s struggles to revive its flagging economy have helped bolster the dollar while pushing the Chinese yuan
USDCNY,
-0.01%
toward its weakest level since late last year. The offshore yuan traded at 7.29 to the dollar on Monday, near its weakest level since November.

Read this next: Opinion: The debt supercycle that hit the U.S. and Europe has now come for China

A weakening eurozone economy has weighed on the euro and boosted the dollar. PMI survey data released earlier this month showed Europe’s services sector weakening alongside manufacturing. GDP data released by Eurostat, Europe’s official economic statistics agency, has been tepid compared to the U.S. The latest reading on second-quarter GDP put it at 0.3%.

Right now, the dollar will be tough to beat given the twin tailwinds created by rising real interest rates and still-robust economic growth.

The yield on the 10-year Treasury Inflation-Protected Security note
912828B253
was trading north of 2.2% Friday, according to data from the St. Louis Fed. The 10-year TIPS yield hit its highest level since 2009 earlier this month when it broke north of 2%. The inflation-protected security is often cited as a proxy for U.S. “real” yields, which refers to the return bond investors receive after adjusting for inflation.

On the growth side of the equation, the Atlanta Fed’s GDPNow forecast estimated the rate of growth for the third quarter at 5.9% according to its latest reading dated Thursday. A year ago, even the most optimistic economists on Wall Street were expecting growth of about 2%, and top Fed officials had a median projection of 1.2% growth for 2023, according to projections released in September.

“It’s hard to beat the dollar when it is a high yielder among safe havens in a risk-off environment,” Steve Englander, head of North America macro strategy at Standard Chartered, said in comments emailed to MarketWatch.

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August 28, 2023
U.S. stock futures little changed after short-lived Wagner mutiny in Russia; oil futures rise

U.S. stock-index futures opened near unchanged and attempted to edge higher Sunday night, as investors reacted to chaotic weekend events that saw a short-lived rebellion that pitted the mercenary Wagner Group against the Russian military leadership. After advancing to within around two hours of Moscow, the mutiny was abruptly halted, with Wagner Group leader Yevgeny Prigozhin reportedly agreeing to depart for Belarus. Analysts said the events, while a potential plus for Ukraine 16 months after Russia’s invasion, appeared to weaken Russian President Vladimir Putin’s hold on the country, That raises concerns about the potential for further internal strife, a recipe for uncertainty that could feed volatility in financial markets. Futures on the Dow Jones Industrial Average
YM00,
+0.09%
rose 20 points, while S&P 500
ES00,
+0.10%
futures ticked up 2.75 points and Nasdaq-100 futures
NQ00,
+0.16%
edged up 11.25 points shortly after the start of electronic trading. Moves for all three contracts amounted to less than 0.1%. Stocks fell last week, with the S&P 500
SPX,
-0.77%
snappng a streak of five straight weekly gains. Oil futures rose, with West Texas Intermediate crude for August delivery
CL.1,
+1.26%

CL00,
+1.26%,
the U.S. benchmark, up 48 cents, or 0.7%, at $69.64 a barrel on the New York Mercantile Exchange.

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June 25, 2023
ECB not ready to ‘pause’ rate hikes as inflation fight continues, Lagarde says

The European Central Bank on Thursday lifted interest rates by 25 basis points, slowing the pace of tightening as it delivered a seventh straight increase, indicating it’s not ready to press the pause button.

“We are not pausing,” ECB President Christine Lagarde told reporters at a news conference, adding that the stance was “very clear.”

The increase lifted the ECB’s main rate to 3.25%, near a 15-year high.

“The inflation outlook continues to be too high for too long,” the ECB Governing Council said in a statement at the conclusion of its policy meeting.

“Headline inflation has declined over recent months, but underlying price pressures remain strong. At the same time, the past rate increases are being transmitted forcefully to euro area financing and monetary conditions, while the lags and strength of transmission to the real economy remain uncertain,” the ECB said.

Lagarde told reporters that the lending survey informed the decision to lift rates by a quarter point rather than a half point. She said there was a strong consensus behind the quarter-point move, while acknowledging some policy makers had preferred a half-point hike.

The euro
EURUSD,
-0.38%
initially slumped after the statement, but rebounded sharply to trim a loss versus the U.S. dollar after Lagarde said the ECB wasn’t prepared to pause the rate-hiking cycle. The euro was down 0.2% at $1.1035 after trading as low as $1.1003. The euro has rallied 3% versus the dollar so far in 2023.

European government bond yields were also lifted after Lagarde ruled out a pause. The yield on the 10-year German government bond
TMBMKDE-10Y,
2.242%,
or bund, was up around a half of a basis point at 2.289%.

The ECB move comes after the Federal Reserve on Wednesday delivered a 10th consecutive rate increase, but signaled that it was prepared to hold off on further tightening depending on incoming economic and financial data. Asked if the ECB could continue on a tightening path if the U.S. central bank paused, Lagarde dismissed the notion that ECB decisions were “dependent” on the Fed.

Market participants, meanwhile, have priced in three Fed rate cuts by year-end. The ECB, in contrast, was expected to deliver further monetary tightening.

Inflation in the eurozone continued to run at a 7% year-over-year clip in April, roughly in line with market expectations, but a modest acceleration from March. Core inflation, excluding food, energy, alcohol and tobacco, ticked down a tenth to 5.6% from 5.7%.

A slowing eurozone economy, however, has bolstered arguments for bringing the monetary tightening cycle to an end, economists said. The ECB’s bank lending survey released Tuesday showed a tightening in conditions, with the largest tightening in credit standards for the last two quarters since the sovereign debt crisis.

The ECB in March shrugged off worries about the banking sector, delivering a half-point rate hike but signaling that future decisions would be made on a meeting-by-meeting basis, abandoning a longstanding policy of “forward guidance” aimed at massaging market expectations around future rate moves.

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May 4, 2023
Asian stocks moving lower in wake of latest volatile session on Wall Street

TOKYO (AP) — Asian shares were mostly lower on Wednesday following another volatile day on Wall Street, as traders braced for updates on inflation and corporate earnings.

Benchmarks fell in Tokyo
NIY00,
+0.09%,
Shanghai
SHCOMP,
-1.12%
and Hong Kong
HSI00,
-2.90%
but rose in Sydney.

South Korea’s Kospi
180721,
+0.34%
lost 0.1% to 2,189.86 after the Bank of Korea raised its key rate by 0.5 percentage point, amid the backdrop of Fed rate hikes in the U.S. and growing inflation risks from the weak won and rebounding global oil prices.

In currency trading the Japanese yen declined to a 24-year low against the U.S. dollar
JPYUSD,
-0.24
at 146 yen-levels, raising expectations of another intervention by Tokyo to prop up the yen. By midday the dollar
USDJPY,
+0.24%
was at 146.17 yen, up from 145.80 late Tuesday. The euro
EURUSD,
+0.12%
cost 96.96 cents, inching down from 97.07 yen.

The weaker yen raises costs for both consumers and businesses who rely on imports of food, fuel and other needs, but the bigger purchasing power for foreign currencies is expected to boost tourism. Japan reopened fully to individual tourist travel this week after being closed for more than two years because of the pandemic.

Japan’s benchmark Nikkei 225 lost 0.2% to 26,348.73 in morning trading. Australia’s S&P/ASX 200
ASX10000,
-1.54%
gained nearly 0.2% to 6,656.00. Hong Kong’s Hang Seng slipped 2% to 16,491.39, while the Shanghai Composite shed 1.2% to 2,943.24.

On Tuesday, the S&P 500
SPX,
-0.65%
fell 0.7%, marking its fifth straight loss, closing at 3,588.84. The Nasdaq
COMP,
-1.10%
dropped 1.1% to 10,426.19. The Dow Jones Industrial Average
DJIA,
+0.12%
added 0.1% to 29,239.19, while the Russell 2000 index
RUT,
+0.06%
rose 1 point, or about 0.1%, to 1,692.92.

Recession fears have been weighing heavily on markets as stubbornly hot inflation burns businesses and consumers. Economic growth has been slowing as consumers temper spending and the Federal Reserve and other central banks raise interest rates.

The International Monetary Fund on Tuesday cut its forecast for global economic growth in 2023 to 2.7%, down from the 2.9% it had estimated in July. The cut comes as Europe faces a particularly high risk of a recession with energy costs soaring amid Russia’s invasion of Ukraine.

See: Global economy most vulnerable since COVID crisis, with housing market at potential ‘tipping point,’ IMF warns

Wall Street is closely watching the Federal Reserve as it continues to aggressively raise its benchmark interest rate to make borrowing more expensive and slow economic growth. The goal is to cool inflation, but the strategy carries the risk of slowing the economy too much and pushing it into a recession.

“The market desperately wants a reason for the Fed to be able to stop tightening and the data recently hasn’t given them that opening with respect to inflation,” said Willie Delwiche, investment strategist at All Star Charts.

Computer-chip manufacturers continued slipping in the wake of the U.S. government’s decision to tighten export controls on semiconductors and chip manufacturing equipment to China. Qualcomm
QCOM,
-3.99%
fell 4%.

See: Intel reportedly plans to lay off thousands of workers, with details potentially emerging alongside quarterly earnings

Uber
UBER,
-10.42%
fell 10.4% and Lyft
LYFT,
-12.02%
slumped 12% following a proposal by the U.S. government that could give contract workers at ride-hailing and other gig economy companies full status as employees.

The Fed will release minutes from its last meeting on Wednesday, possibly giving Wall Street more insight into its views on inflation and next steps.

Investors still expect the Fed to raise its overnight rate by three-quarters of a percentage point next month, the fourth such increase. That’s triple the usual amount, and would bring the rate up to a range of 3.75% to 4%. It started the year at virtually zero.

Rex Nutting: Leading indicators show inflation is slowing, but Fed policy makers are too busy looking in rearview mirror to notice

The government will also release its report on wholesale prices Wednesday, providing an update on how inflation is hitting businesses. The closely watched report on consumer prices will be released on Thursday, and a report on retail sales is due Friday.

“Everyone is still hoping that every inflation report will be the one that shows that pressure is alleviating,” Delwiche said.

Wall Street is also gearing up for the start of the latest corporate earnings reporting season, which could provide a clearer picture of inflation’s impact.

Among the companies reporting quarterly results this week: PepsiCo
PEP,
+0.48%,
Delta Air Lines
DAL,
-1.97%
and Domino’s Pizza
DPZ,
-1.99%.
Banks including Citigroup
C,
-2.76%
and JPMorgan Chase
JPM,
-2.89%
will also report results.

In energy trading, benchmark U.S. crude
CL00,
-0.75%
lost 82 cents to $88.53 a barrel in electronic trading on the New York Mercantile Exchange. U.S. crude-oil prices fell 2% Tuesday. Brent crude
BRN00,
-0.56%,
the international pricing standard, fell 62 cents to $93.67 a barrel.

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October 11, 2022