Shares jump on tech boost; yen on intervention watch

Ankur Banerjee and Alun JohnReuters
The yen remained stuck near 34-year lows ahead of the Bank of Japan's two-day policy meeting. (AP PHOTO)
Camera IconThe yen remained stuck near 34-year lows ahead of the Bank of Japan's two-day policy meeting. (AP PHOTO) Credit: AP

World stocks have risen led by tech names as attention shifts to earnings from US megacaps, while the yen was mired near 34-year lows, keeping traders wary of intervention from Japan.

An after-hours surge in shares of electric vehicle maker Tesla, following its promise of new models, and upbeat earnings from some US companies lifted sentiment, spurring a rally in tech stocks in Asia, where the sector rose 3.6 per cent and Europe, where it gained 2.5 per cent.

Europe's broad STOXX 600 was 0.2 per cent higher on Wednesday, as the rally in tech stocks - helped by a 10 per cent surge in wafer maker ASM International on raised revenue forecasts - offset soft earnings from drugmaker Roche and luxury goods maker Kering, whose shares fell to their lowest since 2017.

Nasdaq futures were up 0.65 per cent.

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"It feels like this week is getting back to market fundamentals and earnings. At least temporarily, we are sidestepping geopolitics which have been impacting markets in the last two weeks," said Samy Chaar, chief economist at Lombard Odier.

Safe haven gold has fallen more than 4 per cent since its Friday high to stand at $2.317.9 an ounce.

Still to come in an earnings-packed week are results from tech giants Meta Platforms, Alphabet and Microsoft.

"The positive data in European PMIs will drive upward revisions to GDP consensus in Europe. In the US the data, so far, is difficult to read," Chaar added.

Purchasing Managers Index surveys on Tuesday showed overall business activity in the euro zone and in Britain expanded at their fastest pace in nearly a year, while business activity cooled in the US

That divergence helped the euro to nudge above $1.07 in Asia trade, its highest in more than a week, though it failed to hold and was last down 0.16 per cent on the day at $1.0684.

"For once, US-eurozone divergence in data has come to the benefit of euro/dollar," said Francesco Pesole, currency strategist at ING, in a note.

"(Though) hard data - inflation and employment above all - has been the real drag on the pair so far, so caution is warranted when it comes to rallies prompted by activity surveys like PMIs."

US gross domestic product figures and the March personal consumption expenditure data - the Fed's preferred inflation gauge - due later this week will be crucial for the dollar and for investors' attempts to gauge the path of US rates.

Markets now see the first Federal Reserve rate cut coming in September, with expectations of 42 basis points of cuts this year. At the start of the year, traders had priced in 150 bps of easing for the whole year.

The drastic shift in rate expectations has elevated Treasury yields and lifted the dollar in the past few weeks, with pressure felt particularly in Asia.

In the latest illustration, Indonesia's central bank delivered a surprise rate hike on Wednesday, stepping up efforts to support the rupiah currency.

The Japanese yen was last at 154.9 per dollar, trading at its lowest since 1990 ahead of the Bank of Japan's two-day policy meeting that concludes on Friday. The yen is down nearly nine per cent this year.

The dollar/yen pair, which is sensitive to US yields, has traded in an extremely narrow range in the past few weeks, with traders wary that a push above 155 could raise the risk of dollar-selling intervention by Japanese authorities.

A senior official of Japan's ruling party told Reuters they were not yet in active discussion on what yen levels would be deemed worthy of market intervention, though the currency's slide towards 160 to the dollar could prod policymakers to act.

The yield on 10-year Treasury notes was at 4.638 per cent on Wednesday, up a fraction on the day, having dipped as low as 4.568 per cent on Tuesday.

Oil prices were down slightly, with US crude at $83.03 per barrel and Brent at $88.02.

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