Wall Street turned modestly lower in late trade yesterday, mostly in sync with subdued global share market movements, while the yen hovered near 2022 intervention levels after more official Japanese jawboning to deter shorting of the currency since last week’s monetary policy tightening.
Treasury yields barely moved, reflecting muted trading across asset classes ahead of Good Friday, when US markets and many other financial centres will be closed.
The S&P 500 closed down 14.61 points, or 0.28 per cent, at 5,203.58. the Dow Jones Industrial Average fell 31.31 points, or 0.08 per cent, to 39,282.33, and the Nasdaq Composite fell 68.77 points, or 0.42 per cent, to 16,315.70.
MSCI’s gauge of stocks across the globe fell 1.02 points, or 0.13 per cent, to 778.43.
“It’s an interesting dynamic, and this holds every time we have a Fed meeting — the next week tends to have a quieter tone to it. Especially a holiday-shortened week like we have here, and the amount of data influence is going to be lighter,” said Art Hogan, chief market strategist at B Riley Wealth in New York, referring to the Federal Reserve.
“That’s attracting the sideways movement we’ve seen.”
The pan-European STOXX 600 index rose 0.24 per cent, and MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.25 per cent higher 0.25 per cent, at 535.59.
In the spotlight was the yen, which has been trading close to its weakest against the dollar since 1990, even after the Bank of Japan raised interest rates last week for the first time in 17 years.
The dollar ticked up 0.1 per cent to 151.56 yen, facing the risk of Japan intervening to prevent further falls in the Japanese currency. Dollar/yen rose to 151.94 in October 2022, before intervention pushed it lower.
Japanese Finance Minister Shunichi Suzuki said yesterday he would not rule out any measures to cope with the yen’s weakening, echoing a warning from Tokyo’s top currency diplomat the previous day.
The dollar weakened 0.06 per cent to 7.248 versus the offshore Chinese yuan, which was supported after a stronger-than-expected fixing of its trading band.
Markets were unsettled by a sharp drop in the yuan on Friday, after months of tight trading, and some speculate China is loosening its grip on the currency to allow it to fall.
“We’ve got changing sands in the FX market. You’ve got threat of intervention from Japan … and from China. It’s good to see that they do actually care about the economy and they are willing to step in. It’s not quite the stimulus we want, but they are saying ‘enough is enough now, we do need to worry about our deflation’,” XTB research director Kathleen Brooks said.
A 14 per cent decline in the yen’s value over the last 12 months fed a surge in Tokyo’s Nikkei index to record highs in recent days, even though it slipped 0.04 per cent yesterday.
Mixed outlooks
Last Wednesday, the Federal Open Market Committee left US interest rates where they were and the FOMC’s median dot plot projections showed no change to the previous projection of three rate cuts this year, despite a strong economy and stubborn inflation.
Confusing the picture somewhat since, whileChicago Fed President Austan Goolsbeeon Monday said he had pencilled in three rate cuts this year, Fed Governor Lisa Cook urged caution and Atlanta Fed President Raphael Bostic reiterated Friday remarks trimming his expectations to one cut.
US interest rate futures price about three Fed rate cuts this year and about a three-in-four chance of the first cut in June.
US yields edged up after a report showing orders for long-lasting US manufactured goods increased more than expected in February, while business spending on equipment showed tentative signs of recovery, boosting the economy’s prospects in the first quarter.
They retreated slightly after the Treasury auctioned US$67 billion in five-year notes to solid demand.
The yield on benchmark US 10-year notes was off 2.5 basis point at 4.228 per cent. The 2-year note yield, which typically moves in step with interest rate expectations, was flat at 4.5868 per cent.
The week’s most important data, the February Personal Consumption Expenditure Price Index, comes at the end of the week, when hardly anyone is around to watch.
The federal government is open on Good Friday, but bond and stock markets are closed, so any trade reaction will come on Monday.
US crude futures settled 0.4 per cent lower at US$81.62 a barrel and Brent settled 0.58 per cent lower at US$86.25 per barrel.
Spot gold added 0.24 per cent to US$2,176.69 an ounce. US gold futures gained 0.09 per cent to US$2,176.80 an ounce.
bitcoin fell 1.74 per cent to US$69,753.73. Ethereum ETH= declined 1.55 per cent last fetching US$3572.7. — Reuters
