On July 11, both stock indices and bond yields on the global stage witnessed a fall after the release of the United States inflation report, which triggered expectations from traders in terms of interest rate cuts. On the other side, the Japanese yen witnessed a sharp rise in its value against the United States dollar in a short period; there is a chance that the Japanese government has taken some serious steps to strengthen its currency value against the U.S. dollar.
There was an unpredicted decline of 0.1 per cent in United States consumer prices during June, even though there was no change in May reports, which led to a fall in U.S. Treasury yields, affecting all categories without exception. This shows that the increasing inflation marked the slowest this year, which means that it will strengthen the economy as the price rise situation is now less hasty. Jerome Powell, who is the chairman of the United States Federal Reserve, states that to strengthen the possibility of a reduction in interest rates, more positive data is required from lawmakers on Capitol Hill.
Natixis, Boston`s portfolio strategist analyst, Mr. Garrett Melson, states that the release of the CPI report is the major catalyst from a macroeconomic point of view. However, it’s positive news to encourage and help regain the Fed’s confidence, and it might result in higher interest deductions.
Market investors have shifted their investing tendency towards lower-weighted sectors like real estate and the utility sector, which are responsive to rates of interest, and away from heavy-weighted technological-based sectors, which witnessed tremendous growth in the current year, because of the fall of the biggest indices of Wall Street despite a positive response from the data. While the Small Cap Russell 2000 Index increased by 3 per cent, it is positively responsive to interest rates.
CFRA Research’s chief investment strategist, Mr. Sam Stovall, states that market investors are already making their technical moves, which are completely based on the assumption that the Fed will deduct their interest rates without waiting for the Fed’s actual move.
New York`s Dow Jones Industrial Average witnessed a rise of 0.08 per cent, or a point of 32.39, and settled at 39753.75. The S&P 500 fell to 49.37 points at 0.88 per cent and settled at 5584.54. The NASDAQ composite has to settle at 18283.41 with a loss of 364.04 points, or 1.95 per cent, after showing continuous gains from previous trading sessions. Both the S&P 500 and NASDAQ composite ended their long session-ending streak of six and seven, respectively, after their current session loss.
During the initial trading session of the day, the MSI gauge of stocks started their day with a 0.7 per cent high rate, but unfortunately, they had to settle at 824.01 with a loss of 0.76 points or a fall of 0.09 per cent. While there is a gain of 0.6 per cent in Europe STOXX 600 at the end of the current trading session.
As per the current currency market status, the Japanese yen witnessed a sharp rise of around 2 per cent against the United States dollar as traders indicated that there is an interest rate deduction in the U.S. market.
The 38-year low currency value of the Japanese Yen against United States dollars last week and the current sharpest rise of the Yen are clear indications that Japanese currency regulatory experts and the government might take a clear step. For this reason, the Japanese Yen rose against U.S. dollars.
On the question that arose after a sharp rise in Japan`s yen, whether any intervention occurred, the country’s top-notch diplomat, Masato Kanda, showed no interest in answering it. Japanese television company T.V. Asahi reported a high chance of intervention by the country`s high officials based on some government references.
The dollar index, which indicates the difference between United States dollars and other currencies, which include Japanese yen and euros, has seen a loss of 0.48 per cent to 104.47, while the euro witnessed a gain of 0.31 per cent to 1.0864 U.S. dollars. The Japanese yen, which was up for the weekend last week, has now seen a rise of 1.75 per cent at 158.84 against the U.S. dollar.
Sterling indicates a rise of 0.51 per cent to 1.291 United States dollars, even after a year of high growth. The August interest rate cuts in Britain are the reason for this sharp rise. This is more than expected from the predicted GDP data.
After the release of current price data, U.S. bonds, which have a maturity of 2 to 10 years, have witnessed a significant loss since the middle of March of this year. And maturity of 20 to 30 years yields drops to the past two-week low. On Thursday, the 10-year yield declined to 7.4 and 4.206 per cent from Wednesday`s 4.28 per cent. While the 30-year bond yield witnessed a drop in basis points by 5.6 with 4.4144 per cent as compared to Wednesday`s 4.47 per cent.
On the other side, the United States ended at a valuation of 0.6 per cent at 82.62 U.S. dollars per barrel, and Brent gained 0.4 per cent at 85.40 U.S. dollars per barrel. While gold futures gained 1.77 per cent at 2.414.10 U.S. dollars per ounce as interest rates strengthened the precious metal like gold, spot gold saw a sharp rise of 2.414.27 U.S. dollars per ounce at a rate of 1.82 per cent.
Link: https://www.reuters.com/markets/global-markets-wrapup-1-2024-07-11/
