Tag: Japanese yen

CNBC Daily Open: Lower rates might hurt banks

[ad_1]

JP Morgan headquarters at Canary Wharf financial district at the heart of Canary Wharf financial district on 6th February 2024 in London, United Kingdom.

Mike Kemp | In Pictures | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Unsteady markets
U.S. markets were mixed on Tuesday. The S&P 500 and Nasdaq Composite rose, buoyed by Oracle’s 10% surge, while the Dow slipped. Asia-Pacific stocks fell Wednesday. Japan’s Nikkei 225 lost around 1.4%, extending its seven-day losing streak. The Japanese yen strengthened to 141.17 against the U.S. dollar, its highest this year.

First Harris-Trump debate
In their first face-to-face meeting, Vice President Kamala Harris met former President Donald Trump for their first — and perhaps only – presidential debate. On the economic front, both candidates clashed over tariffs, fracking and China policy. After the debate, Taylor Swift endorsed Harris on Instagram, and signed off her post as “Childless Cat Lady.”

Tough environment for European companies
China’s environment for businesses is so thorny that European companies have grown discouraged with operating in the country, according to the EU Chamber of Commerce. If European companies were to invest in China further, Beijing must act on its pledges to improve the business conditions, the chamber’s paper wrote.

Big price reports
The U.S. consumer price index for August comes out later today, while the producer price index, which measures prices at the wholesale level, will be released a day later. They’re the last major economic data the Federal Reserve will receive — and hence influence its decision on the size of cuts — before its meeting next week.

[PRO] U.S.-listed global stocks
With the outlook for the U.S. economy looking uncertain, investors can turn their attention to global companies. At the same time, investors may want to stick with the safety of the U.S. stock market. CNBC Pro looked for companies headquartered overseas, but listed in the U.S. – and may experience over 100% upside, according to analysts.

The bottom line

Everyone loves lower interest rates.

As rates fall, borrowing becomes cheaper. For the consumer, that’s most felt in areas like housing; for companies, it tends to boost spending on expansion and investment.

Those acts trigger a virtuous cycle of spending, boosting consumption and growth, which in turns increases employment. The economy loves lower rates too and swells up.

There’s one industry, however, that generally enjoys higher interest rates: banking.

One way banks make money is through the net interest income. That’s the difference between the interest rate they charge on loans and the rate they offer on savings. As rates rise, banks can raise the former, which is a revenue source, while keeping the latter, a cost, low.

With rate cuts looming on the horizon, however, that age of abundance is coming to an end for big banks.

JPMorgan poured cold water on the market’s expectation of around $90 billion for NII in 2025. That number “is not very reasonable” because the Fed will cut rates, said JPMorgan President Daniel Pinto.

If the biggest bank in the U.S. thinks it can’t keep loan rates high, it’s hard to imagine smaller banks can maintain juicy NII of the previous years.

Investors didn’t take JPMorgan’s caution warmly. Its shares lost around 5% and weighed down the Dow Jones Industrial Average, which declined 0.23%.

On the other hand, the S&P 500 rose 0.45% and the Nasdaq Composite added 0.84%.

With rate cuts on the horizon, banks might experience a dip in NII revenue — but many are likely to see revenue and sentiment rise.

– CNBC’s Jeff Cox, Pia Singh and Brian Evans contributed to this story.

[ad_2]
Source link

September 10, 2024
RBC Capital Markets: Market pricing of RBA rate cuts “totally misplaced”

[ad_1]

Share

Alvin Tan, Head of Asia FX Strategy at RBC Capital Markets cites elevated inflation rates and slowing growth in Australia as proof that the easing path of the RBA will be more gradual, with rate cuts starting next year. Additionally, he examines the BOJ’s policy normalization path, saying that a rate hike would help to strengthen the yen in the long-term, but it would not be a “smooth ride” higher.

[ad_2]

Source link

September 4, 2024
Portfolio manager discusses how they are rotating within the Japanese equity market

[ad_1]

Share

George Efstathopoulos of Fidelity International says that while they are becoming more neutral on the broader Japanese market, mid-cap and bank stocks are becoming more attractive.

[ad_2]

Source link

August 29, 2024
Stock market today: Asian shares are mixed after gains on Wall Street

[ad_1]

HONG KONG (AP) — Asian stocks were mixed Tuesday after stocks advanced on Wall Street and yields jumped in the U.S. bond market as election-related issues swayed markets worldwide.

U.S. futures fell and oil prices rose. The Japanese yen fell to near a fresh 38-year low, reaching 161.67 yen to the dollar early Tuesday.

Tokyo’s benchmark Nikkei 225 added 1.1% to 40,074.69, as the weaker yen spurred buying of export-oriented shares.

Australia’s S&P/ASX 200 shed 0.4% to 7,718.20. South Korea’s Kospi dropped 0.8% to 2,781.92 despite data from Statistics Korea showing the country’s consumer inflation slowed to an 11-month low in June.

Hong Kong’s market was higher after a holiday break on Monday. The Hang Seng climbed 0.3% to 17,775.84 and the Shanghai Composite index edged up 0.1% to 2,995.78.

Elsewhere, Taiwan’s Taiex gained 0.6%, while the SET in Bangkok slipped 0.4%.

On Monday, the S&P 500 rose 0.3% to 5,475.09. The Dow Jones Industrial Average edged up 0.1% to 39,169.52, and the Nasdaq composite gained 0.8% to 17,879.30.

Some of the world’s strongest action was across the Atlantic, where the CAC 40 index in Paris jumped as much as 2.8% before settling to a gain of 1.1%. Results from France suggested a far-right political party may not win a decisive majority in the country’s legislative elections. That bolstered hopes for potential gridlock in the French government, which would prevent a worst-case scenario where a far-right with a clear majority could push policies that would greatly increase the French government’s debt.

This is a big year for elections worldwide, with voters heading to the polls in the United Kingdom later this week and soon elsewhere. In the United States, pollsters are measuring the fallout from last week’s debate between President Joe Biden and former President Donald Trump.

Investors are also eyeing the potential impact from a Supreme Court ruling Monday that former presidents have broad immunity from prosecution, likely extending the delay in a criminal case against Donald Trump to after the November election.

Trump Media & Technology Group, whose stock has been rising and falling with Trump’s White House chances, climbed 1% to $33.08. Shares of the company behind Trump’s Truth Social platform, though, are still well below their perch of roughly $70 reached earlier this year.

Treasury yields jumped, as they did Friday immediately following the Biden-Trump debate. Increased prospects for a Republican sweep in November sent traders back to moves from 2016, according to strategists at Morgan Stanley. Besides pushing rates higher, traders also piled into stocks of energy and financial companies.

The yield on the 10-year Treasury climbed to 4.46% from 4.39% late Friday and from 4.29% late Thursday. It’s a reversal of the general trend since the spring, when the 10-year Treasury yield had topped 4.70% in late April.

Yields had been largely easing on hopes inflation will slow enough to convince the Federal Reserve to cut its main interest rate later this year, down from the highest level in more than two decades. High rates have been grinding on the U.S. economy by making it more expensive to borrow money for a house, car or anything else.

Hopes for rate cuts held after a report on Monday showed U.S. manufacturing weakened last month by more than economists expected. Perhaps even more importantly for Wall Street, the report from the Institute for Supply Management also said price increases are decelerating. Taken together, the data could offer more of the evidence that the Federal Reserve wants to see of lessening pressure on inflation before it will cut rates.

This week’s economic highlight will likely arrive Friday, when the U.S. government will say how many workers employers hired during June. Economists predict overall hiring slowed to 190,000 from May’s 272,000. That would get the number closer to what Bank of America calls the “Goldilocks” figure of roughly 150,000, give or take 25,000.

At that level, the U.S. economy could continue to grow and avoid a recession without being so strong that it puts too much upward pressure on inflation.

In other dealings, benchmark U.S. crude rose 15 cents to $83.53 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, added 23 cents to $86.83 per barrel.

The euro cost $1.0729, down from $1.0738.

[ad_2]

Source link

July 2, 2024
Hang Seng leads selloff for Asia stocks, with 4% slump after China data

[ad_1]

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

[ad_2]

Source link

January 16, 2024
Japanese yen sees wild swing amid intervention fears after falling to nearly 1-year low versus dollar

[ad_1]

The Japanese yen roared back violently against the dollar Tuesday amid fears of intervention by Tokyo after trading at its weakest in nearly a year after a round of strong U.S. employment data.

The U.S. dollar fetched 148.92 Japanese yen
USDJPY,
-0.42%,
down 0.6%, after trading as low as 147.415 yen in a sharp tumble from a session high of 150.18 yen. The dollar hadn’t traded above the 150-yen level since Oct. 21, 2022, according to FactSet data.

Japanese authorities in the fall of 2022 intervened in the market, selling dollars and buying yen as the Japanese currency slumped. Currency traders had been on the lookout for renewed intervention as the yen extended its recent weakness. Japan’s Ministry of Finance has issued several verbal warnings over recent weeks, but they have failed to arrest the yen’s fall.

Finance Minister Shunichi Suzuki earlier Tuesday had warned that “all measures are on the table with a high sense of urgency,” according to Nikkei.

But FX analysts were skeptical the yen’s bounceback was due to intervention.

“Talk of intervention but I am skeptical. It seems like the market is doing it to itself with orders to sell dollar above JPY150. BOJ intervened three times last year, none was during US time zone,” said Marc Chandler, managing director at Bannockburn Global Forex, in a note to clients.

The dollar had initially extended its rally versus the yen and other major currencies after data showed U.S. job openings jumped unexpectedly to 9.6 million in September, up from a revised 8.9 million in August. Analysts surveyed by The Wall Street Journal had expected a reading of 8.8 million.

Continued strength in the labor market added to a rise in Treasury yields
BX:TMUBMUSD10Y,
which in turn boosted the dollar. The ICE U.S. Dollar Index
DXY,
a measure of the currency against a basket of six major rivals, remained up 0.1% at 107.06, after trading at its highest since November.

[ad_2]

Source link

October 3, 2023
U.S. dollar defies China, Russia and Wall Street skeptics as 2023 rebound continues

[ad_1]

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.

[ad_2]

Source link

August 28, 2023
Why U.S. stocks and bonds stumbled on talk of a Bank of Japan policy tweak

[ad_1]

Worries about a possible policy tweak by the Bank of Japan threw a wet blanket on a stretched U.S. stock-market rally Thursday, with the Dow Jones Industrial Average snapping its longest winning streak since 1987 after the 10-year Treasury yield surged back above the 4% level.

The Japanese yen also strengthened after a news report said policy makers on Friday would discuss a possible tweak to the Bank of Japan’s so-called yield-curve control policy that would loosen the cap on long-dated government bond yields.

Nikkei, without citing sources, reported that BOJ officials would talk about the matter at Friday’s policy meeting and that the potential change would allow the yield on the 10-year Japanese government bond
TMBMKJP-10Y,
0.440%
to trade above its cap of 0.5% “to some degree.”

‘Ultimate fear’

Why is that a negative for U.S. Treasurys and, in turn, U.S. stocks?

The “ultimate fear” is that Japanese investors, who have vast holdings of U.S. fixed income, including Treasury notes and other securities, “begin to see a higher level of yields in their own backyard,” Torsten Slok, chief economist at Apollo Global Management, told MarketWatch in a phone interview. That could prompt heavy liquidation of those U.S. positions as investors repatriate holdings to reinvest the proceeds at home.

That dynamic explains the knee-jerk reaction that saw the 10-year U.S. Treasury yield
TMUBMUSD10Y,
4.004%
surge more than 16 basis points to end above 4%, he said. Yields rise as debt prices fall.

The surge in yields, in turn, saw stocks give up early gains, with U.S. indexes ending lower across the board.

What is yield curve control?

The Bank of Japan began implementing yield curve control, or YCC, in 2016, a policy that aims to keep government bond yields low while ensuring an upward-sloping yield curve. Under YCC, the BOJ buys whatever amount of JGBs is necessary to ensure the 10-year yield remains below 0.5%.

Nikkei said a possible tweak would allow gradual increases in the yield above 0.5%, but would clamp down on any sudden spikes, allowing the BOJ to rein in fluctuations driven by speculators.

Global market participants are sensitive to changes in YCC. The BOJ sent shock waves through markets in December when it lifted the cap from 0.25% to 0.5%. Investors were rattled by the prospect of the Bank of Japan giving up its role as the remaining low-rate anchor among major central banks.

BOJ Gov. Kazuo Ueda in May said the bank would start shrinking its balance sheet and end its yield-curve control policy if a 2% inflation looks achievable and sustainable after many years of undershooting.

Yen rallies

The yield on the 10-year JGB has traded above 0.4%, but remained below the 0.5% cap. Continued interest rate rises by the Federal Reserve and other major central banks in the past year have raised worries that the 10-year JGB yield could test the limit, Nikkei reported. Those rate hikes, meanwhile, have added pressure to the yen, whose weakness is seen contributing to inflation pressures.

The yen
USDJPY,
-0.02%
strengthened following the report. The U.S. dollar was off 0.5% versus the currency, fetching 139.48 yen.

The Dow Jones Industrial Average
DJIA,
-0.67%
ended the day down nearly 240 points, or 0.7%, snapping a 13-day winning streak, while the S&P 500
SPX,
-0.64%
declined 0.6% and the Nasdaq Composite
COMP,
-0.55%
lost 0.5%.

Japanese stocks have solidly outpaced strong gains for U.S. equities in 2023, with the Nikkei 225
NIK,
+0.68%
up 26% so far this year versus an 18.7% rise for the S&P 500.

See: Japan’s stock market is roaring 25% higher. These 4 things could keep the rally going.

What’s next

Investors are waiting to see what the Bank of Japan actually has to say.

While the Nikkei report helped “exaggerate” a selloff in Treasurys, the market may be inoculated against bigger swings after the BOJ’s December adjustment to the rate band, said Ian Lyngen and Benjamin Jeffery, rates strategists at BMO Capital Markets, in a note.

The analysts said they expect that “the magnitude of the follow through repricing in U.S. rates will be comparatively more contained than would otherwise be expected.”

More recently, the weak yen has raised the cost of hedging long Treasury positions for Japanese investors. So a stronger yen resulting from a shift toward tighter policy would help make hedging costs for owning Treasurys less onerous for Japanese investors as well, Lyngen and Jeffery wrote, “which over the longer term may begin to make Treasurys more attractive to Japanese buyers and add to the list of sources for duration demand.”

That could make U.S. debt more attractive to new Japanese buyers, Slok agreed.

But that’s oveshadowed by the near-term worry, Slok said, that existing Japanese investors will be inclined to sell Treasurys. Flow data will be very much in focus if the Bank of Japan follows through on the apparent trial balloon floated in the Nikkei report.

Investors will be watching, he said, to see “if the train is leaving the station.”

[ad_2]

Source link

July 27, 2023
U.S. stock futures little changed after short-lived Wagner mutiny in Russia; oil futures rise

[ad_1]

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.

[ad_2]

Source link

June 25, 2023
Is Japan’s world-beating stock-market rally merely a function of a weak yen?

[ad_1]

Japanese stocks are primed to outpace global peers this year, with the Nikkei 225 Stock Average reaching its highest level in nearly 33 years last week and up 17.6% year-to-date.

However, most of the Japan’s stock outperformance is a direct result of renewed weakness in Japanese yen, and it could tell us little about domestic policy or economic performance in Japan, argued Adam Cole, chief currency strategist at RBC Capital Markets.

Unsurprisingly, Japan’s outperformance is attracting attention. Investors have cited a number of drivers besides a weak yen, including corporate governance reforms, a push to return cash to shareholders, and cheaper valuations and lower volatility relative to much of the U.S. market.

Billionaire investor Warren Buffett is also feeding the excitement. Berkshire Hathaway Inc.
BRK.A,
+0.69%

BRK.B,
+0.59%
has boosted its stake in five Japanese trading conglomerates and now has more equity exposure in Japan than any other country outside the U.S.

The Nikkei
NIK,
+0.37%,
the best performing major market index of 2023, has solidly outperformed the S&P 500
SPX,
+1.17%,
which is up around 7% so far this year. The iShares MSCI Japan ETF
EWJ,
+0.32%,
which tracks the MSCI Japan Index, is up 9.7% in the year to date, versus a gain of 7.5% for the S&P 500-tracking SPDR S&P 500 ETF Trust
SPY,
+1.17%.

See: Japan’s stock market is smoking the S&P 500. Is it too late to jump in?

Cole, in a note, pointed to the chart below highlighting the relative performance of Japanese equities, which has recently followed the dollar/yen currency pair
USDJPY,
+0.33%
closely. It “should not be surprising given the prominence of exporters in listed Japanese companies,” he said in a Wednesday note.

SOURCE: RBC CAPITAL MARKETS, BLOOMBERG

The U.S. dollar fetched 139.45 yen Wednesday, its strongest level versus the Japanese currency since last November, amid broad strength for the greenback. The ICE U.S. Dollar index
DXY,
+0.03%,
which measures the currency’s strength against a basket of six major rivals, advanced 0.4% to 103.90 on Wednesday, according to FactSet data.

Cole thinks there is strong evidence that economic activity in advanced economies has become less sensitive to exchange-rate movements over the last 30 years as moves in foreign exchange tend to be “fully passed through to trade prices and hence export margins.”

As a result, internationally-exposed equity markets have become more sensitive to exchange-rate movements.

When comparing the Nikkei 225’s performance relative to the MSCI World Index
990100,
+0.29%,
which represents large and midcap equity performance across all 23 developed markets, Cole said Japanese equities are almost “exactly in the middle of the last 30 years’ range, rather than being at a 30 year high.”

If RBC’s expectation of further yen weakness is correct, Japanese stocks may still have the potential to continue their outperformance, said Cole.

He warned, however, that investors should be aware that the causality should run from the currency to the equity market, instead of the other way. That means the rally in the equity market tells us “little about domestic policy or economic performance in Japan,” Cole said.

[ad_2]

Source link

May 26, 2023
Wall Street cheers latest inflation report, but some say it could spell trouble for stocks down the road

[ad_1]

Wall Street embraced the U.S. April consumer-price index, a closely watched inflation gauge published Wednesday, with cautious optimism.

But some Wall Street analysts are worried inflation might not be slowing quickly enough to satisfy the market’s expectation for as many as three interest-rate cuts by the Fed before the end of the year.

U.S….

[ad_2]

Source link

May 10, 2023
Calls to move away from the U.S. dollar are growing — but the greenback is still king

[ad_1]

Calls to move away from relying on the U.S. dollar for trade are growing.

More and more countries — from Brazil to Southeast Asian nations — are calling for trade to be carried out in other currencies besides the U.S. dollar.

The U.S. dollar has been king in global trade for decades — not just because the U.S. is the world’s largest economy, but also because oil, a key commodity needed by all economies big and small, is priced in the greenback. Most commodities are also priced and traded in U.S. dollars.

But since the Federal Reserve embarked on a journey of aggressive rate hikes to fight domestic inflation, many central banks around the world have raised interest rates to stem capital outflows and a sharp depreciation of their own currencies.

“By diversifying their holdings reserves into a more multi-currency sort of portfolio, perhaps they can reduce that pressure on their external sectors,” said Cedric Chehab from Fitch Solutions.

To be clear, the U.S. dollar remains dominant in global forex reserves even though its share in central banks’ foreign exchange reserves has dropped from more than 70% in 1999, IMF data shows.

The U.S. dollar accounted for 58.36% of global foreign exchange reserves in the fourth quarter last year, according to data from the IMF’s Currency Composition of Foreign Exchange Reserves (COFER). Comparatively, the euro is a distant second, accounting for about 20.5% of global forex reserves while the Chinese yuan accounted for just 2.7% in the same period.

China is one of the most active players in this push given its dominant position in global trade right now, and as the world’s second largest economy.

Based on CNBC’s calculation of IMF’s data on 2022 direction of trade, mainland China was the largest trading partner to 61 countries when combining both imports and exports. In comparison, the U.S. was the largest trading partner to 30 countries.

“As China’s economic might continues to rise, that means that it’ll exert more influence in global financial institutions and trade etc,” Chehab told CNBC last week.

China — long among the top 2 foreign holders of U.S. Treasurys — has been steadily reducing its holdings of U.S. Treasury securities.

Mainland China held nearly $849 billion of U.S. Treasurys as of February this year, the latest data from the U.S. Treasury department showed. That’s at a 12-year low, according to historic data.

Changing dynamics

Economic benefits

Analysts say changing global economic dynamics are driving the co-called de-dollarization trend which can benefit local economies in a number of ways.

Trading in local currencies “allow exporters and importers to balance risks, have more options to invest, to have more certainty about the revenues and sales,” former Brazilian ambassador to China, Marcos Caramuru, told CNBC last week.

Another benefit for countries moving away from using the dollar as the middle man in bilateral trade, is to “help them move up the value chain,” said Mark Tinker from ToscaFund Hong Kong told CNBC “Street Signs Asia” early April.

“It isn’t about selling cheap stuff to Walmart, keeping down the prices for American consumers in order to earn dollars to buy its energy. This is now about actually a completely bilateral trade bloc,” Tinker said.

Meanwhile, growth of non-U.S. economic blocs also encourage these economies to push for wider use of their currencies. The IMF estimates that Asia could contribute more than 70% to global growth this year.

“U.S. growth might slow, but U.S. growth isn’t what it’s all about anymore. There is a whole non-U.S. block that’s growing,” said Tinker. “I think there is going to be a re-internationalization of flows.”

Geopolitical concerns

Geopolitical risks have also accelerated the trend to move away from U.S. dollar.

“Political risk is really helping introduce a lot of uncertainty and variability around how much of a safe haven that U.S. dollar really is,” said Galvin Chia from NatWest Markets told “Street Signs Asia” earlier.

Tinker said what accelerated the calls for de-dollarization was the U.S. decision to freeze Russia’s foreign currency reserves after Moscow invaded Ukraine in February 2022.

The yuan has reportedly replaced the U.S. dollar as the most traded currency in Russia, according to Bloomberg.

So far, the U.S. and its western allies have frozen more than $300 billion of Russia’s foreign currency reserves and slapped multiple rounds of sanctions on Moscow and the country’s oligarchs. This forced Russia to switch trade to other currencies and increase gold in its reserves.

“Now you find that if you disagree with U.S. foreign policy, you risk having those confiscated or frozen. You’ve got to have alternative place to put those assets,” Tinker said. In the Middle East, major oil exporter Saudi Arabia has reportedly signaled it’s open to trade in other currencies other than the greenback.

Although analysts don’t anticipate a complete break away from dollar-denominated oil trade over the short-term, “I think what they’re saying more is, well, there’s another player in town, and we want to look at how we trade with them on a bilateral basis using yuan,” said Chehab.

Dollar is still king

Despite the slow erosion of its hegemony, analysts say the U.S. dollar is not expected be dethroned in the near future — simply because there aren’t any alternatives right now.

“Euro is somewhat an imperfect fiscal and monetary union, the Japanese yen, which is another reserve currency, has all sorts of structural challenges in terms of the high debt loads,” Chehab told CNBC.

The Chinese yuan also falls short, Chehab said.

“If you look at the yuan reserves as a share of total reserves, it’s only about 2.5% of total reserves, and China still has current account restrictions,” Chehab said. “That means that it’s going to take a long time for any other currency, any single currency to really usurp the dollar from that perspective.”

Data from IMF shows that as of the fourth quarter of 2022, more than 58% of global reserves are held in U.S. dollar — that’s more than double the share of the euro, the second most-held currency in the world.

The international reserve system “is still a U.S.-reserve dominated system,” said NatWest’s Chia.

“So long as that commands the majority, so long as you don’t have another currency system or economy that’s willing to step up to that international reach, convertibility and free floating and the responsibility of a reserve currency, it’s hard to say dollar will be displaced over the next 3 to 5 years. unless someone steps up.”

— CNBC’s Joanna Tan and Monica Pitrelli contributed to this report.

[ad_2]

Source link

April 23, 2023

$3,000 gold and more outrageous market predictions investors shouldn’t brush aside.

[ad_1]

Monday served as another smackdown for investors who are banking on a Goldilocks economy and a less aggressive Fed.

Some are now not ruling out a Grinch-like turn from the central bank — a 0.75% hike next week instead of the 0.50% markets have been pinning hopes on — following strong data on services, jobs and wages.

It all goes along with the theme of 2022 — expect the unexpected. The relief of moving out of a crippling pandemic was quickly replaced by the biggest war on Europe’s shores in decades, that sparked worldwide inflation surges.

What comes next is anyone’s guess and that brings us to our call of the day via Saxo Bank’s annual “Outrageous Predictions” for 2023.

While some of these will sound crazy, note that the Saxo team, led by Chief Investment Officer Steen Jakobsen, have nailed a few wild prophecies in the past decade. Those include: a Brexit prediction in 2015, a 25% drop for the S&P 500 from its 2007 high in 2008, a tripling of Bitcoin’s value forecast in 2017.

The focus for 2023’s prediction is that “a return to the disinflationary prepandemic dynamic is impossible because we have entered into a global war economy, with every major power across the world now scrambling to shore up their national security on all fronts; whether in an actual military sense, or due to profound supply-chain, energy and even financial insecurities that have been laid bare by the pandemic experience and Russia’s invasion of Ukraine,” says Jakobsen.

As for those predictions, here we go:

Gold crosses $2,075 then rockets to $3,000 on unstoppable inflation. “Fed policy tightening and quantitative tightening drives a new snag in U.S. treasury markets that forces new sneaky ‘measures’ to contain Treasury market volatility that really amounts to new de facto quantitative easing,” says Saxo. And China’s end of zero-COVID drives up demand, commodity prices and inflation.
Widespread price controls to cap official inflation due to war economy mentality. “In 2023, expect broadening price and even wage controls, maybe even something like a new National Board for Prices and Incomes being established in the U.K. and the U.S.,” said Saxo. Market fallout? Fuel for gold’s
GC00,
+0.19%
climb.
There’s a new reserve asset in town. Non U.S.-allied countries move away from the U.S. and IMF to create an “international clearing union (ICU) and a new reserve asset, called the Bancor (currency code KEY)” that borrows from economist John Maynard Keynes idea of resisting U.S. power over the international monetary system. Nonaligned central banks slash U.S. dollar reserves, Treasury yields soar and the dollar
DXY,
+0.09%
drops 25% against a basket of currencies that trade with Bancor.
Japan pegs USDJPY to 200. Pressure intensifies on the already weak yen
USDJPY,
+0.04%
into 2023 as currency intervention fails and inflation soars. The government resets the financial system, erasing all debt, recapitalizing banks, as trillions of yen return to Japan shores. But the yen still weakens by year-end.
A $10 trillion-dollar Manhattan project. A team of major tech leaders form a mega research-and-development effort for energy infrastructure and ground-breaking technologies — the Third Stone. Companies tied to the project soar in an overall weak environment for investing.
Tax haven ban kills private equity. The OECD launches a full ban on the biggest tax havens in the world in 2023 and in the U.S., carried interest tax as capital gains is shifted to ordinary income. It’s a body blow for private equity and venture capital — the valuation of publicly listed private-equity firms fall 50%.

The rest of their predictions are here, such as the formation of an EU Armed Forces in 2023 and an “UnBrexit” referendum.

Read: Why Monday’s stock-market rout should be a wake up call for investors

The markets

MarketWatch

Stocks
DJIA,
-0.96%

SPX,
-1.40%

COMP,
-1.77%
are drifting into the red, with Treasury yields
TMUBMUSD10Y,
3.571%

TMUBMUSD02Y,
4.395%
steady, the dollar
DXY,
+0.09%
lower and oil
CL.1,
-3.43%

BRN00,
-3.73%
also down.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

BioVie stock
BIVI,
-18.43%
is climbing after positive results from the clinical-stage biopharmaceutical company on a drug for Parkinson’s and Alzheimer’s.

NRG Energy
NRG,
-15.79%
agreed to buy Vivint Smart Home
VVNT,
+32.31%
in a $5.2 billion deal. Vivint shares are soaring.

MEI Pharma
MEIP,
-33.52%
shares are tumbing after drugmaker said it would stop developing cancer treatment zandelisib outside of Japan and announces job cuts. Herbalife shares
HLF,
-18.85%
are down 10% after an offering of convertible notes

Powell Industries
POWL,
+19.11%
stock is up 9% after the electrical equipment maker’s well-received results and new orders. Within software Sumo Logic
SUMO,
+11.65%
and GitLab shares
GTLB,
+5.71%
are surging on upbeat results and forecasts.

Layoffs extending beyond tech? PepsiCo
PEP,
-0.86%
is reportedly cutting hundreds of workers at its North American headquarters.

Home builder Toll Brothers
TOL,
-1.56%
will report results after the close.

The October trade deficit jumped 5.4% to $78,2 billion.

The U.S. and EU are reportedly considering fresh steel and aluminum tariffs on China to fight carbon emissions.

Best of the web

“Nothing to be glad about.” An empty, lonely and cold formerly occupied Ukraine city.

Morocco’s World Cup team leans on its secret weapon of parents in the stands.

Why human composting could be the next big thing.

The chart

Headed into the holidays, consumers are using savings and credit, says a team of Jefferies analysts led by Corey Tarlowe. “The savings rate continues to trend lower and credit card balances are growing +15% Y/Y. We believe these trends indicate that the consumer is stretched.”

Against this backdrop, they like Costco
COST,
-1.34%,
Dollar General
DG,
-1.52%,
Target
TGT,
+0.13%
and Walmart
WMT,
-0.98%.

The tickers

These were the top-searched tickers on MarketWatch at 6 a.m.:

Ticker	Security name
TSLA, -2.00%	Tesla
GME, -5.32%	GameStop
AMC, -9.00%	AMC Entertainment
NIO, +2.37%	NIO
BBBY, -8.86%	Bed Bath & Beyond
AAPL, -1.83%	Apple
APE, -5.40%	AMC Entertainment Holdings preferred shares
COSM, -17.49%	Cosmos
AMZN, -2.26%	Amazon.com
MULN, -3.08%	Mullen Automotive

Random reads

Tributes pour after “Cheers” star Kirstie Alley dies at 71.

Happy 190th birthday to the world’s oldest tortoise.

A green Grinchy dog for Christmas? Not everyone’s heart grew three sizes.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton

[ad_2]

Source link

December 6, 2022

Stocks waver on Wall Street ahead of speech by Fed chair

[ad_1]

NEW YORK — Stocks are wavering in early trading on Wall Street ahead of a speech by Jerome Powell, the chair of the Federal Reserve, on the outlook for the economy and inflation. Treasury yields were higher and crude oil prices rose. The S&P 500 index was hovering around the breakeven line after the first few minutes of trading Wednesday. The tech-heavy Nasdaq was up 0.3% and the Dow Jones Industrial Average fell 0.2%. European markets were trading higher and Asian markets closed mixed overnight. The yield on the 10-year Treasury note, which influences mortgage rates, rose to 3.77%.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

U.S. markets are flat ahead of a highly anticipated that may give clues about future interest rate hikes.

On the last trading day of the month, futures for the Dow Jones industrials and the S&P 500 appeared static. Major U.S. indices are clinging to small gains in November, which if they hold, would be the second straight month of advances after a miserable September.

There is hope on Wall Street that the Fed will slow the scale and pace of its interest rate hikes and investors are closely watching the latest data on inflation, consumer spending and the employment market. They’ll be looking for any signs of a shift in policy when Powell speaks at the Brookings Institution about the outlook for the U.S. economy and the labor market on Wednesday.

The Fed’s benchmark rate currently stands at 3.75% to 4%, up from close to zero in March.

The U.S. government will be releasing several reports about the labor market this week. A report about job openings and labor turnover for October will be released Wednesday, followed by a weekly unemployment claims report Thursday. The closely watched monthly report on the job market will be released on Friday.

Investors were also keeping tabs on China, where protests have erupted over the “zero-COVID” strategy that has confined millions of people to their homes, sometimes for months.

China has eased some controls after demonstrations in at least eight mainland cities and Hong Kong. It’s unclear if protests will start up again after authorities detained an unknown number of people and stepped up surveillance.

Renewed restrictions on businesses and other activity have hit manufacturing, with an official survey announced Wednesday showing the purchasing managers index falling to 48.0 in November from 49.2 the month before. The index is on a scale of 0 to 100 where readings 50 and above show expansion.

“A further fall in the new orders and new export orders indices suggests this was largely driven by weakening domestic and foreign demand,” Capital Economics said in a report. “Today’s surveys suggest that intensified virus disruption has delivered another blow to the economy this month.”

Japan’s benchmark Nikkei 225 lost 0.2% to finish at 27,968.99 after reports said industrial production contracted 2.6% in October, compared with 1.7% in September, amid weakening demand from China and other world markets.

Other regional markets advanced.

Hong Kong’s Hang Seng added 2.1% to 18,584.49. The Shanghai Composite index inched up less than 0.1% to 3,151.34. Australia’s S&P/ASX 200 rose 0.4% to 7,284.20, while South Korea’s Kospi rose 1.6% to 2,472.53.

“Due to a more reflective approach to the recent zero-COVID measures, Chinese stocks have taken substantial leaps and bounds this week. However, that optimism is giving way to hawkish contemplation as traders twiddle their thumbs awaiting a speech from Federal Reserve Chair Jerome Powell later Wednesday,” Stephen Innes, a managing partner at SPI Asset Management, said in a report.

Shares in Europe climbed higher at midday after a report showed that inflation in the 19 countries that use the euro currency eased for the first time in more than a year as energy prices retreated from painful highs. But the 10% rate, a drop from 10.6% in October, still hovers near a record that has robbed consumers of their spending power and led economists to predict a recession.

Britain’s FTSE 100 and France’s CAC 40 each added 0.8%, while Germany’s DAX gained 0.4%.

In energy trading, benchmark U.S. crude gained $1.67 to $79.87 a barrel. Brent crude, the international standard, added $1.72 to $85.97 a barrel.

In currency trading, the U.S. dollar rose to 138.72 Japanese yen from 138.65 yen. The euro cost $1.0365, up from $1.0331.

———

Kageyama reported from Tokyo; Ott reported from Washington.

[ad_2]

Source link

November 30, 2022
Asian shares rise except Japan as markets eye China protests

[ad_1]

TOKYO — Asian shares were mostly higher Tuesday as jitters over protests in China set off by growing public anger over COVID-19 restrictions subsided.

U.S. futures edged higher. Oil prices rose more than $1 per barrel.

Chinese shares rebounded after they were hit by sharp losses on Monday following protests over the weekend in various Chinese cities. Hong Kong’s Hang Seng jumped 4% to 17,981.31, while the Shanghai Composite added 2.3% to 3,148.17.

Japan’s Nikkei 225 lost 0.5% to 28,016.58. Australia’s S&P/ASX 200 gained 0.3% to 7,249.80. South Korea’s Kospi added 0.8% to 2,427.13.

Although market sentiment has been weighed down by the recent demonstrations in China, some analysts noted calm could return in coming sessions. The world’s second largest economy has been stifled by a “zero COVID” policy which includes lockdowns that continually threaten the global supply chain.

“The absence of any clear escalation in protests could aid to bring some calm to markets,” said Yeap Jun Rong, market strategist at IG.

The unrest has stoked worries on Wall Street that if Chinese leader Xi Jinping cracks down further on dissidents there or expands the lockdowns, it could slow the Chinese economy, which would hurt oil prices and global economic growth, said Sam Stovall, chief investment strategist at CFRA.

“A lot of people are worried about what the fallout will be, and basically are using that as an excuse to take some recent profits,” he said.

Stephen Innes, managing partner at SPI Asset Management, said business was returning as usual, although the heavy police presence may unnerve a Western audience.

“Chinese markets are rallying early in the session as local investors take a more pragmatic approach to the current COVID proceedings. Indeed, a probable outcome is a quicker loosening of restrictions once the current COVID wave and numerous protest flash points subside,” he said.

Japanese government data released Tuesday showed that the unemployment rate for October was unchanged from September at 2.6%. Separately, data released by another ministry showed a slight increase in the number of available jobs per job-seeker at 1.35. The increase has continued for 10 months.

Hiring was up in anticipation of tourists returning in droves to Japan. Borders that have been basically closed during the coronavirus pandemic have reopened at a time when the declining value of the yen against the U.S. dollar and other currencies make Japan an attractive destination for tourists.

On Monday, more than 90% of the stocks in the S&P 500 closed in the red, with technology companies the biggest weights on the broader market. Apple, which has seen iPhone production hit hard by lockdowns in China, fell 2.6%.

Several casino operators gained ground as the Chinese gambling haven of Macao tentatively renewed their licenses. Las Vegas Sands rose 1.1% and Wynn Resorts gained 4.4%.

The fallout from the collapse of crypto exchange FTX continued. Cryptocurrency lender BlockFi is filing for Chapter 11 bankruptcy protection. Cryptocurrency exchange Coinbase Global fell 4% and the price of Bitcoin slipped 2.1%.

The S&P 500 fell 1.5% to 3,963.94. The Dow dropped 1.4% to 33,849.46. The tech-heavy Nasdaq lost 1.6% to close at 11,049.50.

Anxiety remains high over the ability of the Federal Reserve to tame inflation by raising interest rates without going too far and causing a recession. The central bank’s benchmark rate currently stands at 3.75% to 4%, up from close to zero in March. It has warned it may have to ultimately raise rates to previously unanticipated levels to rein in high prices on everything from food to clothing.

Federal Reserve Chair Jerome Powell will speak at the Brookings Institution about the outlook for the U.S. economy and the labor market on Wednesday.

The Conference Board will release its consumer confidence index for November on Tuesday. That could shed more light on how consumers have been holding up amid high prices and how they plan on spending through the holiday shopping season and into 2023.

The U.S. government will release several reports about the labor market this week that could give Wall Street more insight into one of the strongest sectors of the economy. A report about job openings and labor turnover for October will be released on Wednesday, followed by a weekly unemployment claims report on Thursday. The closely watched monthly report on the job market will be released on Friday.

In energy trading, benchmark U.S. crude added $1.37 to $78.61 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose $1.81 to $85.00 a barrel.

In currency trading, the U.S. dollar fell to 138.53 Japanese yen from 138.90 yen. The euro cost $1.0387, up from $1.0344.

———

Yuri Kageyama is on Twitter at https://twitter.com/yurikageyama

[ad_2]

Source link

November 28, 2022
Closing prices for crude oil, gold and other commodities

[ad_1]

Benchmark U.S. crude oil for January delivery rose 96 cents to $77.24 a barrel Monday. Brent crude for January delivery fell 44 cents to $83.19 a barrel.

Wholesale gasoline for December delivery was unchanged at $2.33 a gallon. December heating oil fell 2 cents to $3.22 a gallon. December natural gas fell 31 cents to $6.71 per 1,000 cubic feet.

Gold for February delivery fell $13.50 to $1,755.30 an ounce. Silver for March delivery fell 48 cents $21.13 an ounce and March copper fell 1 cent to $3.62 a pound.

The dollar fell to 138.89 Japanese yen from 139.05 yen. The euro fell to $1.0339 from $1.0412.

[ad_2]

Source link

November 28, 2022

Many investors are betting on an inflation peak. Here’s why a former hedge-fund manager says they’re wrong.

[ad_1]

Investors are waking up to big trouble in big China. Stock futures and oil prices are falling after angry anti-COVID zero protests swept the country.

“This is a sudden powerful new distraction for markets when this week was supposed to be about incoming U.S. data,” sum up strategists at Saxo Bank. They say watch companies exposed to China, “given forward earnings are likely to be downgraded following further China lockdowns and protests.”

Before China grabbed the spotlight, holiday weekend sales, jobs and inflation data that due this week, as well as remarks by Fed Chairman Jerome Powell were the big focus.

Other questions are now swirling. Will China-related falls in oil prices lend to the peak inflation theory? And what about China’s post-COVID economic rebirth?

Onto our call of the day, which says it’s time to short long bonds because of sticky food inflation — thanks to China. It comes from Russell Clark, a former hedge-fund manager who has spent the last 20 years focusing on that market, macro and short selling.

He notes investors have been scooping up the the iShares 20 years+ Treasury Bond ETF
TLT,
-0.34%,
a liquid exchange-traded fund that buys long-dated bonds, even as with U.S. inflation hovering at 1970 highs.

“The reason that people are getting bullish bonds I believe is that the yield curve has inverted. And every time that has happened, you have a recession and you want to get out of equities and into bonds,” says Clark. A yield curve inversion occurs when long-term interest rates drop below short term rates. The inversion of 2 and 10-year Treasury yields is at its steepest since the 1980s.

Clues may lie in Japan’s poorly performing bond market. “Not only has it been prescient in leading the U.S. bond yields lower from 1999 onward, in 2020 the JGB market was also prescient in signaling the future U.S. treasury sell off,” he says.

Russell Clark

And what Japan is likely seeing that U.S. investors aren’t right now is China-driven food inflation. That’s something the Fed will find it tough to ignore, he said.

Since the since the 1980s, food commodity prices have followed raw commodity prices higher, If the Fed wants to work that down, it will raise interest rates. For example, falling natural-gas prices
NG00,
-3.37%
would help ease fertilizer costs for farmers.

Clark points out that China is the world’s biggest food importer, with much higher prices than the U.S.

“Pork, which is the most consumed meat in China, is now 3 times more expensive than the U.S. market, and has recently doubled in price. As Japan is also a large importer of pork, perhaps this was the reason the JGB market sold off before the U.S.,” he said.

Beef is also a major import for China, and yes, prices are much higher than that of the U.S.

“In essence, I am saying that China is exporting food inflation to the rest of the world, and I don’t see that ending at the moment. JGBs seem to agree – and when I look at the index value of US Food CPI on a log basis, I keep thinking that is says interest rates are going higher not lower,” said Clark.

He sees food inflation looking secular, rather than cyclical, due to the demands of an increasingly urbanized China. “Secular food inflation implies POLITICAL pressure to have higher interest rates. US treasuries look a short to me, just as everyone has gotten long,” he said.

The markets

Stock futures
ES00,
-0.73%

YM00,
-0.54%

NQ00,
-0.72%
are falling, and Treasury yields
TMUBMUSD10Y,
3.684%

TMUBMUSD02Y,
4.467%
and oil
CL.1,
-3.12%
also are falling. The Japanese yen
USDJPY,
-0.61%
is seeing some safe-haven bids. The Hong Kong Hang Seng Index
HSI,
-1.57%
closed down 1.5%.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

An apartment-building fire in a locked-down city that killed 10 appeared to spark protests across China, calling for the President Xi Jinping to step down and zero-COVID policies to stop. A BBC reporter was arrested and beaten. Meanwhile, lockdowns mean China farmers are destroying crops they can’t sell.

And similar unrest at China’s Zhengzhou Foxconn
2317,
-0.50%
factory is expected to cause a shortfall of 6 million Apple
AAPL,
-1.96%
iPhone Pros this year.

Pinduoduo shares
PDD,
-1.44%
are soaring after the China-based mobile marketplace reported profit and revenue beats.

MGM Resorts
MGM,
-0.42%,
Las Vegas Sands
LVS,
+0.26%
and Wynn Resorts
WYNN,
-0.57%
higher in premarket after Macao tentatively renewed their casino licenses.

Retailers are in focus after Black Friday online sales topped a record $9 billion. That’s as some wonder if Cyber Monday is still a thing.

St. Louis Fed President James Bullard will sit down for an interview with MarketWatch on Monday, at 12 noon Eastern. New York Fed President John Williams address the Economic Club of New York at the same time. Fed’s Powell will speak on Wednesday, along with several other Fed officials this week.

A busy data week starts Tuesday with home-price indexes and consumer confidence data. GDP, the PCE price index for October — a favored gauge of the Federal Reserve and November employment data are also on tap this week.

Best of the web

‘I believe the economy is the biggest bubble in world history,’ warns ‘Rich Dad, Poor Dad’s Robert Kiyosaki.

Iran was calling for the U.S. to be expelled from the Qatar World Cup.

Lab study shows next COVID strain will be more deadly.

The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:

Ticker	Security name
TSLA, -0.19%	Tesla
GME, -1.99%	GameStop
AMC, -1.70%	AMC Entertainment
AAPL, -1.96%	Apple
COSM, +34.06%	Cosmos Holdings
AMZN, -0.76%	Amazon.com
BBBY, -2.70%	Bed Bath & Beyond
MULN, -2.39%	Mullen Automotive
APE, +0.83%	AMC Entertainment Holdings preferred shares
DWAC, +6.44%	Digital World Acquisition Corp.

Random reads

Chinese woman on a mission to visit everyone else’s lonely elderly relatives.

‘Gaslighting’ is Merriam Webster’s word of the year. No, really.

Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton

[ad_2]

Source link

November 28, 2022

Closing prices for crude oil, gold and other commodities

[ad_1]

Benchmark U.S. crude oil for January delivery fell $1.66 to $76.28 a barrel Friday. Brent crude for January delivery fell $1.71 to $83.63 a barrel.

Wholesale gasoline for December delivery fell 14 cents to $2.33 a gallon. December heating oil fell 12 cents to $3.24 a gallon. December natural gas fell 29 cents to $7.02 per 1,000 cubic feet.

Gold for December delivery rose $8.40 to $1,754 an ounce. Silver for December delivery rose 6 cents $21.43 an ounce and December copper rose 1 cent to $3.63 a pound.

The dollar rose to 139.05 Japanese yen from 138.48 yen. The euro fell to $1.0412 from $1.0413.

[ad_2]

Source link

November 25, 2022
Asian shares mixed as investors eye Tokyo inflation data

[ad_1]

TOKYO — Asian shares were mixed Friday as worries deepened about the regional economy and Japan reported higher-than-expected inflation.

Benchmarks fell in Tokyo, Seoul and Hong Kong, but rose in Sydney and Shanghai. Oil prices advanced.

Investors have their eyes on China‘s lockdowns and restrictions to curb the spread of coronavirus infections, as the direction China takes will have great impact on the rest of Asia.

“Reopening policies have pivoted in China, which will be a gradual process. COVID control measures will vary across cities, but positive top-down approaches will be ongoing,” said Stephen Innes, Stephen Innes, managing partner at SPI Asset Management.

Japan’s benchmark Nikkei 225 lost 0.3% in morning trading to 28,286.40. Australia’s S&P/ASX 200 rose 0.3% to 7,262.40. South Korea’s Kospi edged down 0.1% to 2,438.19. Hong Kong’s Hang Seng slipped 0.8% to 17,521.11. The Shanghai Composite gained 0.5% to 3,105.36.

Data on inflation in Tokyo for November beat analysts’ expectations, with the core consumer price index showing a 3.6% rise, the highest in more than four decades.

The Federal Reserve and the world’s other central banks have been raising interest rates to try to rein in decades-high inflation. But the Bank of Japan has resisted tightening monetary policy, a move that would counter inflationary pressures by discouraging borrowing by businesses and consumers.

“With the Bank of Japan being one of the few outliers which has not embarked on a rate-hiking process, the point of pivot will be a key question into next year,” Jun Rong Yeap of IG said in a commentary.

Shares finished higher Thursday in France, Germany and Britain. U.S. markets were closed for Thanksgiving. Wall Street will have a shortened session on Friday.

In energy trading, benchmark U.S. crude rose 46 cents to $78.40 a barrel in electronic trading on the New York Mercantile Exchange. It gave up $3.01 to $77.94 per barrel on Thursday. Brent crude, the international standard, added 29 cents to $85.55 a barrel in London.

In currency trading, the U.S. dollar rose to 138.64 Japanese yen from 138.58 yen. The euro cost $1.0410, inching down from $1.0411.

———

Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

[ad_2]

Source link

November 24, 2022
Asian stocks down after Wall St weekly loss on rate fears

[ad_1]

BEIJING — Asian stock markets sank Monday after Wall Street ended with a loss for the week amid anxiety about Federal Reserve plans for more interest rate hikes to cool inflation.

Hong Kong’s benchmark fell more than than 2%. Shanghai, Seoul and Sydney also retreated, while Tokyo was little-changed. Oil prices declined.

U.S. stock indexes ended with a weekly loss after a Fed official, James Bullard, rattled investors by suggesting the central bank’s base lending rate might have to be raised to as much as almost double its already elevated level.

“Bullard dimmed the light on rallies,” said Tan Boon Heng of Mizuho Bank in a report.

The Hang Seng in Hong Kong was off 2.1% at 17,616.06 after the territory’s leader, John Lee, tested positive for the coronavirus after returning from an Asia-Pacific meeting in Bangkok.

The Shanghai Composite Index lost 0.8% to 2,072.08 and the Nikkei 225 in Tokyo lost less than 0.1% to 27,904.69.

The Kospi in South Korea fell 1.2% to 2,414.20 and Sydney’s S&P-ASX 200 lost 0.1% to 7,141.50.

India’s Sensex opened down 0.7% at 61.212.75. New Zealand gained while Southeast Asian markets declined.

On Friday, Wall Street’s benchmark S&P 500 index rose 0.5% to 3,965.34. The Dow Jones Industrial Average added 0.6% to 33,745.69. The Nasdaq composite lost less than 0.1% to 11,146.06.

All the major U.S. indexes ended with a loss for the week after Bullard, president of the St. Louis Federal Reserve Bank, gave a presentation that indicated the Fed’s benchmark rate might have to rise to between 5% and 7%. That would be up from its current level of 3.75% to 4% following four hikes of 0.75 percentage points, three times the Fed’s usual margin.

Investors worry repeated rate hikes by the Fed and central banks in Asia and Europe this year to cool surging inflation might tip the global economy into recession.

Traders hope signs economic activity is slowing and inflation pressures are easing might prompt the Fed to ease off its plans. Fed officials including chair Jerome Powell have warned rates might need to stay high for an extended period to extinguish inflation.

Traders expect the Fed to raise its key rate again at its December meeting but by a smaller margin of 0.5 percentage points.

Big U.S. retailers gained after they reported strong quarterly results and gave investors encouraging financial forecasts. Discount retailer Ross Stores surged 9.9% for the biggest gain among S&P 500 stocks. Shoe seller Foot Locker climbed 8.7% after raising its profit and revenue forecast for the year.

U.S. retail sales rose 1.3% in October in a sign of consumer confidence ahead of Christmas shopping. Still, with inflation high, major retailers say Americans are holding out for sales and refusing to pay full price.

Health care and financial stocks also gained. UnitedHealth Group rose 2.9% and Charles Schwab added 2.5%.

Energy and communications companies declined. Marathon Oil fell 1.6% amid a broad pullback in energy prices. U.S. crude oil settled 1.9% lower. Live Nation, an entertainment promoter and venue operator, slumped 7.8%.

In energy markets, benchmark U.S. crude lost 61 cents to $79.50 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.56 to $80.08 on Friday. Brent crude, the price basis for international oil trading, sank 79 cents to $86.83 per barrel in London. It slumped $2.16 to $87.62 the previous session.

The dollar rose to 140.41 yen from Friday’s 140.36 yen. The euro fell to $1.0283 from $1.0331.

[ad_2]

Source link

November 20, 2022

Tag: Japanese yen

‘Ultimate fear’

What is yield curve control?

Yen rallies

What’s next

SOURCE: RBC CAPITAL MARKETS, BLOOMBERG

The markets

The buzz

Best of the web

The chart

The tickers

Random reads

The markets

The buzz

Best of the web

The tickers

Random reads