Stock Rally Set to Extend, Yen Dips Before BOJ: Markets Wrap

Posted by Admin September 19, 2024 Bussiness

(Bloomberg) — Asia was set to extend a rally that pushed global stocks to fresh highs as jobs data supported the view the Federal Reserve can engineer a soft landing for the US economy. The yen edged lower as traders prepared for an interest rate decision in Japan.

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Equity futures for Japan, Australia and Hong Kong all climbed Friday after US shares set new peaks, propelling a gauge of global stocks to a record. The S&P 500 rose 1.7% and the Nasdaq 100 added 2.6%. Treasury yields were little changed Thursday, as were those for Australian and New Zealand government debt early Friday. An index of dollar strength was steady after falling Thursday.

A drop in US jobless claims to the lowest since May signaled the labor market remains healthy despite a slowdown in hiring. This added a boost to risk appetite and eased concerns the Fed may have been too slow to trim borrowing costs when it rate cuts by 50 basis points on Wednesday.

“Despite some volatility after the Fed’s rate cut, the S&P 500’s bullish trend remains intact,” said Fawad Razaqzada at City Index and Forex.com. “The Fed’s decision to deliver a 50-basis point rate cut was largely welcomed by investors. The move was seen as a bold but necessary step to ease economic concerns without sending panic signals reminiscent of the 2008 financial crisis.”

The yen slipped ahead of the Bank of Japan’s policy rate decision on Friday. The central bank is widely expected to hold its benchmark interest rate steady, leaving traders on watch for any clues regarding the prospects of a hike later this year. The nation’s key inflation gauge accelerated in August for a fourth consecutive month, according to the Ministry of Internal Affairs Friday.

The Fed has been a dominant factor for the Japanese currency and this was on display again with the yen whipsawing during US trading on Wednesday after the Fed cut rates and then cautioned that such a move shouldn’t be seen as a new pace of policy easing.

Beyond Japan, data set for release in Asia includes loan prime rates for China, inflation for Hong Kong and foreign exchange reserves for India.

Gains for the S&P 500 on Thursday pushed the benchmark to its 39th record in 2024 and extending this year’s surge to about 20%. Tech led gains, while defensive industries underperformed. The Russell 2000 of small caps rose 2.1%. In late hours, FedEx Corp. tumbled on a bearish outlook. Nike Inc. surged after saying longtime executive Elliott Hill is coming out of retirement to replace John Donahoe as chief executive officer.

While a relative sense of calm prevailed, traders also braced for a quarterly episode known as “triple witching” in which derivatives contracts tied to stocks, index options and futures will mature — potentially amplifying market moves. About $5.1 trillion are set to expire Friday, according to an estimate from Asym 500. The options expiry coincides with the rebalancing of benchmark indexes.

Meantime, the latest MLIV Pulse survey showed that 57% of the 173 respondents believe a rotation into value stocks is likely to accelerate now that the Fed started the easing cycle.

The majority of survey participants, 75%, expect the US to manage a soft landing after the 50 basis-point rate cut, but even those favor value over AI stocks, according to the poll conducted immediately after the decision. Value was especially popular among those expecting the US to hit a recession.

In commodities, gold was steady after climbing 1.1% Thursday, while West Texas Intermediate, the US oil price, was flat after it advanced 1.5% in the prior session on improving risk sentiment following the Fed’s rate cut.

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