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Markets Update am

Yen spikes to 18-month peak

  • Japan’s currency on track for biggest weekly advance since 2008
  • Stocks Fall in Asia, Europe
  • * FTSEurofirst 300 index falls 1.1 percent
  • * IAG shares down on weaker demand outlook
  • * Restaurant Group slumps after profit warning

The yen has surged more than 4 per cent this week as traders were emboldened by the Bank of Japan’s reluctance to fire another easing “bazooka” to head off deflation.

The yen continued its climb to Y107.08 per dollar on Friday with Japan’s stock market closed for national holiday and following weak US economic data.

The yen has appreciated 4 per cent against the dollar this week, on track for its biggest advance since October 2008.

Mr Kuroda has insisted he is waiting to judge the effect of January’s surprise introduction of negative rates. But the inaction has spurred fears that the central bank was running short of ammunition to stimulate growth.

the yen could strengthen to 105 against the dollar — a level some analysts believe could trigger the Japanese government to intervene to restrain the rise.

The yen’s appreciation has also caused Japanese businesses to be extra cautious about the newly commenced financial year after churning out record profits on the back of the currency weakness triggered by Prime Minister Shinzo Abe’s economic stimulus programme.

The dollar’s decline also came after data showing the US economy grew at its slowest pace in two years during the first three months of 2016.

The figure is expected to strengthen calls for the Federal Reserve to tread carefully before lifting interest rates again after it increased rates for the first time in almost a decade December.

European equities fell sharply on Friday and headed for their biggest weekly decline in one month, with the travel and leisure stocks leading the market lower after updates from British Airways-owner IAG and Restaurant Group.

The STOXX Europe 600 Travel and Leisure index fell 2 percent, the top sectoral decliner, putting pressure on the broader market.

International Airlines Group fell 4 percent, the top decliner in the FTSEurofirst 300 index, after saying it would moderate its capacity expansion in the short term in response to weaker overall demand, despite reporting a forecast-beating rise in first-quarter profit.

Britain’s Restaurant Group, which operates chains such as Chiquito and Frankie & Benny’s, slumped 23 percent after warning on full-year profit outlook as it does not expect any improvement in trading conditions in the short term.

Spanish lender Bankia fell 1.7 percent after posting a 3.3 percent fall in first quarter net profit from a year earlier as lower provisions offset pressure from low interest rates.

“Weaker earnings are starting to become a problem. Companies that disappoint are being punished disproportionately, while those that surprise on the positive side shoot up, indicating that markets are nervous and have little patience with underperformance,” Philippe Gijsels, head of research at BNP Paribas Fortis said.

The pan-European FTSEurofirst 300, which hit a three-month high last week, was down 1.1 percent by 0824 GMT. It has fallen more than 1 percent so far this week and remained on track to record its biggest weekly loss in one month.

Shares in Swiss money manager GAM, Swedish engineering group Sandvik and German airline group Lufthansa fell 4.2 to 5.8 percent as their shares traded without the attraction of latest dividend payouts.

Germany’s retail sales fell in March from the previous month, while France’s economy expanded more more than analysts forecast in the first quarter, data showed Friday. The euro area will release figures for gross domestic product, inflation and unemployment, while U.S. updates on consumer confidence and household spending are also due. Russia’s central bank has a policy meeting and six out of 41 analysts surveyed by Bloomberg predict the benchmark interest rate will be cut. The remainder forecast no change.

Commodities

The Bloomberg Commodity Index, a measure of returns on 22 raw materials, rose 0.2 percent, extending this month’s gain to 7.8 percent. Oil is set for its best month in a year in New York, buoyed by data this week that showed U.S. output is at the lowest level since October 2014.

Gold and silver both rallied for the fifth day in a row and were headed for their highest closes since January 2015. Copper advanced 0.8 percent in London on Friday, while nickel, zinc and lead gained more than 1 percent.

The Bloomberg U.S. Treasury Index declined 0.3 percent in April, set for the first monthly loss of 2016. The 10-year yield increased by one basis point to 1.83 percent, having started the month at 1.77 percent. Similar-maturity bonds in Japan yielded minus 0.085 percent at the end of their final trading session in April.

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