Stock markets mostly drop, yen gains after 38-year low

AFP | London

The Daily Tribune - www.newsofbahrain.com

Major stock markets mostly dropped yesterday as Europe gears up for key elections, the US awaits inflation data and Japan contemplates measures to strengthen the yen. The Japanese currency edged up against the dollar after hitting a 38-year low Wednesday, putting investors on alert for a possible intervention by Japanese authorities.

The Japanese unit’s latest retreat came as uncertainty surrounded the Federal Reserve’s timetable for cutting interest rates, and the Bank of Japan’s caution in tightening monetary policy. Investors were meanwhile awaiting the outcomes of French and British general elections due over the next week. Wall Street opened mixed ahead of the first debate presidential between Joe Biden and Donald Trump.

The debate, to take place yesterday evening, “has imbued the market with a bit of a wait-and-see attitude”, said Briefing.com analyst Patrick O’Hare. Investors were also looking forward to the release on Friday of the PCE index, the US Federal Reserve’s preferred measure of inflation. Data out yesterday showed a modest increase in continuing unemployment benefits claims and a drop in business investment spending.

O’Hare said “today’s data was generally on the softer side of things, prompting a drop in Treasury yields and some improvement in the equity futures market, which has leaned on the notion that a rate cut before November could still be possible”. Wall Street’s tech-heavy Nasdaq Composite index edged higher despite concerns that a long-running rally in the tech sector may have been overdone. Shares in chip manufacturer Nvidia, whose processors are prized for AI applications and drove the tech rally, fell by more than one percent at the start of trading.

In Japan, vice finance minister Masato Kanda said this week that authorities were keeping a close eye on movements in foreign exchange markets and were ready to step in with yen support 24 hours a day.