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Markets Update am

Yen  fall on possible BOJ Action

  • Asia slide
  • European stocks track soft Asia session
  • Oil firmer but poor batch of company results damps sentiment.

European stocks are mirroring a mostly soft Asian session as disappointing US corporate earnings leave Wall Street futures stalled just shy of record highs.

Forex action is dominated by a sharp drop for the yen on reports the Bank of Japan is considering negative interest rate loans, helping the Tokyo stock market outperform the region.

Asian shares slid from a 5 1/2-month high on Friday on disappointing earnings from U.S. blue chip companies, but Japanese shares surged after a media report about a possible Bank of Japan policy change weakened the yen.

Japan’s Nikkei erased earlier losses to end the day up 1.2 percent, reaching an 11-1/2 week high and extending the week’s gains to 4.3 percent. The yen,which held steady against the dollar earlier in the session, slipped after a report by Bloomberg News said the Bank of Japan may consider applying negative rates to its lending program for financial institutions.

The dollar rose 0.5 percent, buying 109.98 yen.

The Shanghai Composite index retreated 0.4 percent, extending its weekly loss to about 4.5 percent.

Hong Kong’s Hang Seng index .HSI slid 0.9 percent, narrowing gains for the week to 0.5 percent.

European shares look set to follow suit, with financial spreadbetters predicting Britain’s FTSE 100 down .79%  and France’s CAC 40  down .4%   Germany’s DAX .GDAXI will fall 0.4 percent.

The pan-European Stoxx 600 is down 0.4 per cent after the FTSE Asia Pacific index fell 0.5 per cent. US index futures suggest the S&P 500 will dip just one point from its close of 2,091.5.

The Wall Street barometer sits only 40 points below last May’s record, having rallied nearly 15 per cent from February’s trough, partly on hopes that the first-quarter company earnings season may prove better than analysts’ forecasts.

Unfortunately, the latest batch of results released after the closing bell on Thursday, including numbers from Alphabet, parent of Google, Microsoft and Starbucks, have not been well-received, weighing on S&P 500 futures overnight.

However, the recent stock market rebound also occurred as central banks’ ultra-loose policies ensured bond yields were suppressed, making stocks relatively more attractive, and as a rally in oil prices reduced fears about stress in the energy sector.

And both of those factors may be providing support to investors’ risk appetite on Friday.

The price of Brent crude is up 0.9 per cent to $44.92 a barrel, less than a buck shy of a five-month high. In January, Brent hit a 12-year low of $27.10, but has risen on hopes that falling US production growth and steadier output from other large pumpers may help crimp a global supply glut.

Meanwhile, Friday sees further evidence of how important investors perceive central bank policy to be in setting the market tone. The yen is 1 per cent weaker at ¥110.58 per dollar after Bloomberg reported the BoJ was considering helping financial institutions to lend by offering negative borrowing costs on some loans.

A closely watched survey by Nikkei-Markit showed that activity in Japan’smanufacturing sector fell this month to its lowest level since January 2013. An earthquake last week and aftershocks on the southern island of Kyushu have disrupted supply chains, while the recent resilience of the yen is also keeping pressure on manufacturers.

The price of iron ore, the steelmaking ingredient, this week surged to its highest in 15 months, approaching $70 a tonne. However, Australian miners were lower on Friday as investors reflected upon comments in the previous session from BHP Billiton’s head of Australian operations that the recent rally in the iron ore price may have run its course.

The yield on German 10-year Bunds are barely changed at 0.23 per cent and equivalent maturity US Treasuries are also hardly budging at 1.87 per cent.

Gold, which also had a whipsaw session on Thursday as it tracked moves in the dollar, is down $4 at $1,244 an ounce.

 

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