MSCI’s global equities index was rising modestly yesterday and benchmark US Treasury yields edged down while the yen gained against the dollar as traders bet that Japanese authorities are close to intervening directly to support the currency.
The yen suddenly swung from a loss to a gain versus the dollar, suggesting to traders that Japan may have run rate checks with banks – often a signal of readiness to intervene.
Earlier in the day the Bank of Japan signalled its readiness to continue raising still-low borrowing costs in a politically-charged atmosphere, ahead of a snap election next month.
After two days of gains, Wall Street equities were making little progress, suggesting a muted ending for a week punctuated by a sell-off then a relief rally linked to US President Donald Trump’s withdrawal of tariff threats and ruling out seizing Greenland by force.
With a busy week ahead, including a Federal Reserve meeting, key economic releases and earnings reports, Gene Goldman, Chief Investment Officer at Cetera Investment Management in El Segundo, California said that investors were taking a breath and “in a wait-and-see approach.”
“There’s really no big drivers today and markets really benefited the last couple of days from easing geopolitical risks,” he said. “Stocks are taking a breather because of anticipation of a really big week.”
Fed funds futures are pricing an implied 97 per cent probability that the US Federal Reserve will hold rates steady next week, according to the CME Group’s FedWatch tool.
With disappointing forecasts weighing on Intel shares after its quarterly update late on Thursday, investors were waiting for reports from Microsoft, Meta Platforms and industrial giant Caterpillar among others in the week ahead.
While global stocks have clawed back much of the ground lost in Tuesday’s sell-off, investors are still waiting for details of a deal being negotiated between the US and European leaders regarding Greenland. As a result some big Northern European investors are increasingly wary of the risks of holding US assets.
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