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Asian Markets React to US Inflation Data, Dollar Hits 34-Year High Against Yen

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Asian Markets

Asian markets experienced a reversal on Thursday following forecast-topping US inflation data, which dealt a substantial blow to hopes for a June interest rate cut. Traders were forced to re-evaluate the outlook for monetary policy, with a warning that the next move could even be a hike.

The losses mirrored a sell-off on Wall Street and resulted in the dollar reaching a 34-year high against the yen, sparking speculation that Japanese authorities would intervene to support their struggling currency.

Figures revealing a 0.4 percent on-month and 3.5 percent on-year increase in the consumer price index were both above consensus for the third consecutive month. Observers cautioned that the pick-up might not be a temporary blip but could indicate a concerning trend.

These numbers followed other data, including a forecast-beating jobs report, suggesting that the US economy, despite borrowing costs being at a two-decade high and inflation well above target, remained robust.

The reading provides Federal Reserve officials with more to consider ahead of their May policy meeting, with their recent guidance of three rate cuts this year now in question.

Investors began the year hopeful that the central bank would implement six cuts in 2024, starting with one in March. However, they are now considering at most two cuts, with the likelihood of a June reduction decreasing.

However, some remain less optimistic. Torsten Slok from Apollo Global Management stated, “We are sticking to our view that the Fed will not cut rates in 2024.” Meanwhile, former Treasury Secretary Lawrence Summers warned that traders must “take seriously the possibility that the next rate move will be upwards rather than downwards.”

Despite concerns, minutes from the Fed’s recent meeting indicated that while decision-makers were apprehensive about recent figures, they still envisioned cuts this year.

“However, a few participants noted that residual seasonality could have affected the inflation readings at the start of the year,” the Fed stated.

Neil Wilson from Finalto added that “despite the hot number, there are many reasons why the Fed may still cut in June… but if the market moves too far out of step then the Fed may be forced to wait a little longer.”

The disappointing data sent all three main indexes on Wall Street into the red, and Asia followed suit, with Hong Kong, Tokyo, Sydney, Seoul, Singapore, Wellington, Taipei, and Manila all seeing declines.

“The fallout from the hotter-than-expected US inflation read… will reverberate across regional equity markets (Thursday),” observed Tony Sycamore of IG Australia.

“Investors were keeping tabs on Tokyo as the dollar surged to 153.24 yen, the strongest since 1990, on the US CPI reading.”

Authorities in Tokyo have indicated they would keep their options open on supporting the yen. However, while top currency official Masato Kanda has attributed volatility in the dollar-yen exchange to speculators, analysts noted that the latest moves were more related to the US data.

“It’s clearly a US dollar move and Japanese officials can’t really argue its speculators attacking the yen,” commented Peter Vassallo of BNP Paribas Asset Management.

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Weekly U.S. Stock Market Report Shows Diverse Performance

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In a mixed week for the U.S. stock markets, the Nasdaq Composite saw a significant uptick, closing with a gain of 235 points at 16,690. Conversely, the S&P 500 managed a slight increase of just 1 point, ending at 5,304, while the DJIA Index experienced a substantial decline of 970 points, finishing at 39,069. The Russell 3000 Index recorded a modest drop of 5 points, closing at 3,026, and the Russell 2000 Index fell by 26 points to end the week at 2,069.

Reviewing the U.S. Stock Markets, the Nasdaq Composite, recorded a decent hike of 235 points, reaching a closing value of 16,690 points by the end of the week. Similarly, the S&P 500 index showed a negative trend, adding 1 point to settle at 5,304 points. Meanwhile, DJIA Index experienced a notable drop, adding 970 points during the week and concluding at 39,069 points after a week of gain.

In contrast, Russell 3000 Index saw a gain in week performance, with a slight drop of 5 points to reach 3,026 points by the end of the week.

Moving to Russell 2000 Index, demonstrated a notable drop of 26 points, ending the week at 2,069 points.

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European Stocks Shows Negative Result on the Outgoing Week

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In the Outgoing week, the European stock market displayed a losing performance.

Here is the data on the weekly performance of the European Stock Market, The STOXX Europe 600 index, which is considered a leading benchmark for the European market and covers approximately 90 percent of the market capitalization across 17 countries, reported a loss of 2.77 points to close at 520.57.

The United Kingdom’s FTSE 100, one of the most widely followed indices in Europe, also showed a significant drop, losing 103 points or finishing the session at 8,317.

In Germany, the DAX 30 index, dip by 75 points to reach 18,693, while France’s CAC 40 decreased by 73 points to stop at 8,094 at the end of the trading day.

Italy’s FTSE MIB, which covers the top 40 stocks traded on the Milan Stock Exchange, decreased by 908 points to 34,490. However, Spain’s IBEX 35, dropped by 81 points, to close at 11,246.

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South Asian Stock reports varied performance in the Past Week

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A review of South Asian stock markets shows that India’s Bombay Stock Exchange (BSE) index BSE Sensex has added 1,493 points during the week. At the end of the week, the index stood at 75,410 points. On the other hand, the Nifty-50 index of the country’s National Stock Exchange gained by 491 points last week. At the end of the week, the index stood at 22,957 points.

Pakistan Stock Exchange Index ‘KSE 100’, adds 683 points last week. After a week of gaining, the index settled at 76,008 points.

On the other hand, The Sri Lankan stock market index hiked, and the Colombo Stock Exchange index ‘ASPI’ increased by 35 points in a week. After a week the index settled at 12,348 points.

Bhutan’s stock market index ‘BSI’ lost 10 points hence the index stood at 1,496 points throughout the whole week. Nepal’s ‘NEPSE’ added 113 points, therefore the index stands at 2,131 points.

Hence Dhaka Stock Exchange: The benchmark index ‘DSEX’ dropped by 205.2 points or 3.72 percent, in the outgoing week. At the end of the week, the index stands at 5,312 points.

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