Global Shares Rise, Yen Falls as BOJ Signals Caution on Interest Rates

by Yuki

Global markets experienced a significant rebound today as shares rallied and the yen weakened following reassuring remarks from Bank of Japan’s Deputy Governor Shinichi Uchida. Uchida’s comments, emphasizing the central bank’s cautious stance on interest rate hikes amidst market volatility, provided a much-needed boost after recent turmoil in global financial markets.

In response to Uchida’s remarks, futures for the Euro Stoxx 50 surged by 1.3%, mirroring gains in US futures. Asian markets also saw robust gains, with Japanese stocks leading the charge after the yen depreciated more than 2% against the dollar. This depreciation is seen as beneficial for Japan’s export-oriented economy, enhancing competitiveness abroad.

Reflecting the renewed investor confidence, an index of Asian equities climbed by 1.5%. Concurrently, Treasury yields and the Bloomberg dollar index showed marginal increases.

Uchida’s statement followed widespread criticism of Japan’s abrupt monetary policy tightening on July 31, which triggered a sharp decline in Japanese equities and initiated a global unwinding of currency carry trades. The Deputy Governor underscored that the BOJ would adjust its rate path depending on market conditions and their impact on the economic outlook.

Homin Lee, senior macro strategist at Lombard Odier Singapore Ltd., noted, “It seems that the BOJ is currently satisfied with USD/JPY and JGB yield levels, but remains prepared to consider further hikes if market stability is restored and economic conditions improve.”

Despite the recent market turbulence that pushed the Nikkei and Topix indexes into bear market territory, Uchida’s reassurances provided temporary stability. However, concerns about the US economic outlook and ongoing volatility continue to influence global markets.

In corporate news, Super Micro Computer Inc. reported quarterly results below analysts’ expectations, leading to a double-digit drop in its share price during extended trading.

Looking ahead, market participants are closely watching upcoming economic data releases and central bank speeches, including US consumer credit figures and remarks from Fed officials later this week.

Key Events This Week:

1.US consumer credit, Wednesday

2.Germany industrial production, Thursday

3.US initial jobless claims, Thursday

4.Fed’s Thomas Barkin speaks, Thursday

5.China PPI, CPI, Friday

Market Moves:

Stocks:

1.S&P 500 futures rose 0.8%

2.Japan’s Topix rose 2.9%

3.Australia’s S&P/ASX 200 rose 0.4%

4.Hong Kong’s Hang Seng rose 1.9%

5.The Shanghai Composite rose 0.5%

6.Euro Stoxx 50 futures rose 1.1%

7.Nasdaq 100 futures rose 1%

Currencies:

1.The Bloomberg Dollar Spot Index rose 0.2%

2.The euro fell 0.2% to $1.0910

3.The Japanese yen fell 2% to 147.27 per dollar

4.The offshore yuan fell 0.3% to 7.1836 per dollar

5.The Australian dollar rose 0.5% to $0.6553

6.The British pound rose 0.1% to $1.2705

Cryptocurrencies:

1.Bitcoin rose 0.7% to $56,942.75

2.Ether rose 1.1% to $2,517.47

Bonds:

1.The yield on 10-year Treasuries advanced two basis points to 3.91%

2.Japan’s 10-year yield declined one basis point to 0.875%

3.Australia’s 10-year yield advanced seven basis points to 4.09%

Commodities:

1.West Texas Intermediate crude rose 0.3% to $73.43 a barrel

2.Spot gold was little changed

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