Global stocks tick up while yen slips in calm before U.S. data

Published On : 08/12/2024

By Harry Robertson and Koh Gui Qing

NEW YORK/LONDON (Reuters) -World stocks edged higher on Monday while the yen slipped as a holiday in Japan removed one source of recent volatility, with investors looking ahead to U.S. and Chinese economic data.

Stock markets had a wild ride last week, driven by a plunge in Japan, on the back of weak U.S. jobs numbers and the unwinding of a highly popular Japanese yen trading strategy.

Yet some stronger-than-expected U.S. data helped allay fears of a global slowdown and stocks recovered almost all of their losses by Friday.

MSCI’s gauge of stocks across the globe added 0.25% by 1447 GMT, and on Wall Street, the S&P 500 rose 0.36%. The Nasdaq Composite Index climbed 0.7%, while the Dow Jones Industrial Average was little changed.

“We have been winding risk down during the recent market move globally,” said Robert Both, a senior macro strategist at TD Securities. “Our preferred positioning is dovish with moderate risk allocated at the moment.”

In Europe, the STOXX 600 index was up 0.15%, Germany’s DAX index was flat and Britain’s FTSE 100 was 0.59% higher.

Investors were looking ahead to U.S. consumer price index data for July on Wednesday, which is expected to show month-on-month inflation ticked up to 0.2% after a minus 0.1% reading in June. Retail sales data is due on Thursday.

“It’s a pretty benign expectation,” said Timothy Graf, a senior macro strategist at State Street. “Inflation is really not the problem it once was.”

“The balance of risks is that policy has been too tight for too long. Now you’re starting to see that show up in the labour market.”

Japan’s yen slipped, with the dollar up 0.83% at 147.84 yen. The dollar index was little changed at 103.22 as was the euro. The pound edged up 0.22% to $1.2784.

MUCH QUIETER

A sharp rally in the Japanese currency in July and August has wrong-footed investors, forcing them to unwind so-called carry trades in which they borrow in Japanese yen to buy dollars and other currencies to invest in higher-yielding assets.

Data on Friday showed that leveraged funds – typically hedge funds and various types of money managers – closed their positions in the yen at the quickest rate since March 2011.

“It has been a much quieter start to this week than last week,” said Lee Hardman, currency strategist at MUFG.

“The sharp reduction in short yen positions held by leveraged funds … has likely provided some reassurance as well that the unwind of yen-funded carry trades is now more complete.”

Japanese markets were closed for a holiday on Monday, leading to a calm Asia session which saw MSCI’s non-Japan Asia stock index tick 0.41% higher.

China issues figures on retail sales and industrial production on Thursday, which are expected to show the economy continuing to underperform, potentially exacerbating some investors’ fears about global growth.

The yield on the 10-year Treasury note, which sets the tone for borrowing costs around the world, was little changed at 3.9436% after climbing 15 bps last week in its biggest rise since April. Yields move inversely to prices.

Oil prices inched up, having bounced 3.5% last week as fears of a widening Middle East conflict threatened supplies. [O/R]

Israeli Defense Minister Yoav Gallant spoke on Sunday with U.S. Defense Secretary Lloyd Austin and told him Iran’s military preparations suggest Iran is getting ready for a large-scale attack on Israel.

Brent gained 1.18% % to $80.61 a barrel, while U.S. crude rose 1.5% to $77.99 per barrel.

To read Reuters Markets and Finance news, click on https://www.reuters.com/finance/markets

(Reporting by Harry Robertson in London; additional reporting by Wayne Cole in Sydney; Editing by David Holmes, Chizu Nomiyama and Ros Russell)

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