Global shares firm as US consumer holds up, yen weak ahead of Japan vote
Stronger than expected U.S. retail sales and jobless claims data, suggesting modest improvement in economic activity, helped to push the S&P 500 and the Nasdaq to close at record highs on Thursday.
MSCI's broadest index for global stocks edged up 0.2 per cent on Friday and was on track for a 0.6 per cent weekly gain. Asian shares outside Japan were up 0.9 per cent on the day, while European stocks were broadly flat. Wall Street futures were also flat ahead of the open.
A solid start to earnings season in the U.S. - with companies including streaming giant Netflix beating forecasts - is supporting investor confidence, said Eren Osman, managing director of wealth management at Arbuthnot Latham.
"We're pretty constructive on the (U.S.) macro backdrop... We do see some scope for slowing growth, but not for anything material and that's giving the markets quite a nice bounce," Osman said, adding the potential full impact of U.S. tariffs was still in focus.
Alphabet and Tesla are among the companies reporting half-year results next week, which will further test the market mood.
Oil prices also gained on Friday as investors weighed new European Union sanctions against Russia, which include measures aimed at dealing further blows to Russia's oil and energy industries.
U.S. crude rose 1 per cent to $68.19 per barrel and Brent was up 0.8 per cent to $70.06 a barrel.
The yen was broadly flat at 148.5 per dollar but was about 0.7 per cent weaker this week after polls showed Japanese Prime Minister Shigeru Ishiba's coalition was in danger of losing its majority in the upper house election on Sunday.
Data on Friday showed Japan's core inflation slowed in June due to temporary cuts in utility bills but stayed above the central bank's 2 per cent target. The rising cost of living, including the soaring price of rice, is among the reasons for Ishiba's declining popularity.
"If PM Ishiba decides to resign on an election loss, USDJPY could easily break above 149.7 as it would usher in an initial period of political turbulence," said Jayati Bharadwaj, head of FX strategy at TD Securities.
"JPY could reverse the recent dramatic weakness if the ruling coalition wins and is able to make swift progress on a trade deal with Trump."
Elsewhere, the U.S. dollar index slipped 0.2 per cent to 98.285, but was still heading for a second successive weekly gain of about 0.4 per cent, bouncing from a 3-1/2 year low hit over two weeks ago.
Fed Governor Christopher Waller said on Thursday he continues to believe the central bank should cut interest rates at the end of this month, though most officials who have spoken publicly have signalled no desire to move.
U.S. Treasury yields were slightly lower. Benchmark 10-year yields dropped nearly 3 basis points to 4.44 per cent, while two-year yields also edged 3 bps lower to 3.89 per cent.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNA
an hour ago
- CNA
Dollar strengthens after US and EU agree to tariff deal
TOKYO/LONDON :The dollar rose against major peers on Monday after the United States and the EU struck a framework trade pact, the latest in a flurry of deals to avert a global trade war, with investors also looking to this week's U.S. and Japanese central bank meetings. Meeting in Scotland on Sunday, U.S. President Donald Trump and European Commission President Ursula von der Leyen said the deal provided for an import tariff of 15 per cent on EU goods, half the rate Trump had threatened from August 1. That follows last week's U.S. agreement with Japan, while top U.S. and Chinese economic officials will resume talks in Stockholm on Monday aiming to extend a truce by three months and keep sharply higher tariffs at bay. The euro was last at $1.1693, down 0.4 per cent on the day, reversing an initial knee-jerk rise in Asia trade as investors' focus shifted to what an easing in global trade tensions meant for the dollar overall. "The mood music on U.S. trade negotiations has been a little brighter following agreements with Japan and the EU," said Paul Mackel, global head of FX research at HSBC. "If more 'trade deals' are reached, this could help to reduce this source of policy uncertainty that has weighed against the dollar, at least for now. It could also see other factors such as relative yields becoming more influential." The dollar tumbled sharply earlier this year, particularly against the euro, as fears dramatically higher tariffs on trade with most of its major partners would hurt the U.S. economy caused investors to consider shifting out of U.S. assets. Normally the gap between yields on government bonds is a major factor for currency moves, but at present the euro is meaningfully higher than the gap between U.S. and euro zone yields would imply. The euro was also last down slightly on the yen and sterling, having hit a one-year high on the Japanese currency, and a two-year high on sterling at the start of trade. The dollar was stronger elsewhere, up 0.15 per cent on the yen at 147.83, while the pound was down 0.13 per cent at $1.3428. As concerns subside about the economic fallout from punishing tariffs, investor attention is shifting to corporate earnings and central bank meetings in the United States and Japan in the next few days. Both the Fed and the Bank of Japan are expected to hold rates steady at policy meetings this week, but traders will watch subsequent comments to gauge the timing of the next moves. Investors will also be watching to see Trump's reaction to the Fed's decision. The U.S. President has been putting the Fed under heavy pressure to make significant rate cuts, and Trump appeared close to trying to fire Powell last week, but backed off with a nod to the market disruption that would likely follow. In cryptocurrencies, ethereum jumped 1.7 per cent and reached as high as $3,940.25, the most since December 2024.
CNA
2 hours ago
- CNA
Musk says Tesla, Samsung sign $16.5 billion chip supply deal
SEOUL : Tesla CEO Elon Musk said the U.S. automaker had signed a $16.5 billion deal to source chips from Samsung Electronics, a move expected to bolster the South Korean tech giant's loss-making contract manufacturing business. Samsung's shares jumped as much as 6.8 per cent to their highest since September last year after news of the deal. Musk said Samsung's new chip factory in Taylor, Texas will make Tesla's next-generation AI6 chip, potentially re-energizing the project that has faced long delays amid Samsung's difficulties in retaining and attracting major clients. "Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency. This is a critical point, as I will walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house," Musk said in a post on X on Monday. "The $16.5B number is just the bare minimum. Actual output is likely to be several times higher," he said in another post. According to a senior analyst at NH Investment & Securities, Ryu Young-ho, Samsung's Taylor fab "so far had virtually no customers, so this order is quite meaningful". In October, Reuters reported that Samsung had postponed taking deliveries of ASML chipmaking equipment for its Texas factory as it had not yet won any major customers for the project. It has already delayed the plant's operational start to 2026. POTENTIAL PRODUCTION TIMELINE While no timeline was provided for AI6 chip production, Musk has previously said that next-generation A15 chips will be produced at the end of 2026, suggesting A16 would follow. Lee Dong-ju, an analyst at SK Securities, expects production in 2027 or 2028, but Tesla has a history of missing its targets. Samsung currently makes Tesla's A14 chips, which power its Full Self-Driving driver assistant system, while TSMC is slated to make the AI5, initially in Taiwan and then Arizona, Musk has said. Samsung, the world's top memory chip maker, also produces logic chips designed by customers through its foundry business. The Texas project is central to Samsung Chairman Jay Y. Lee's strategy to expand beyond its bread-and-butter memory chips into contract chip manufacturing. Samsung currently holds just 8 per cent of the global foundry market, far behind industry leader TSMC, which has a 67 per cent share, data from market researcher Trendforce show. Samsung had earlier announced the $16.5 billion chip supply deal without naming the client, saying the customer had requested confidentiality about the details of the deal, which will run through the end of 2033. Three sources briefed about the matter told Reuters that Tesla was the customer for the deal. HELP SAMSUNG'S FOUNDRY BUSINESS The deal with Tesla comes as Samsung, which is due to report its earnings on Thursday, faces mounting pressure in the race to produce artificial intelligence chips, where it trails rivals such as TSMC and SK Hynix. This lag has weighed heavily on its profits and share price. Pak Yuak, an analyst at Kiwoom Securities, said the deal would help reduce losses at Samsung's foundry business, which he estimates exceeded 5 trillion won ($3.6 billion) in the first half of the year. Analysts say Samsung has struggled to retain key clients, with many defecting to TSMC for advanced chips, underscoring technological challenges the firm faces in the race to stay relevant in the capital intensive business. TSMC counts Apple, Nvidia and Qualcomm among its customers. It is not clear whether the Samsung-Tesla deal is related to ongoing trade talks between South Korea and the United States. Seoul is seeking U.S. partnerships in chips and shipbuilding amid last-ditch efforts to reach a trade deal to eliminate or reduce potential 25 per cent U.S. tariffs.
Business Times
2 hours ago
- Business Times
BOJ may paint less gloomy view, signal rate-hike resumption
[TOKYO] The Bank of Japan (BOJ) is set to hold off raising interest rates on Thursday (Jul 31) but may offer a less gloomy view on the outlook after Tokyo's trade agreement with the US last week, signalling rate hikes may resume later this year. Receding global trade tensions following Sunday's agreement between the US and the European Union add relief for BOJ policymakers on the outlook of Japan's export-heavy economy. But the BOJ is likely to warn of lingering uncertainty on how US tariffs affect business activity with the hit to exports seen intensifying later this year, analysts say. 'It's very big progress that reduces uncertainty for Japan's economy – but obviously, some uncertainty remains,' BOJ Deputy Governor Shinichi Uchida said last week on the Japan-US trade deal. Uchida noted questions around how soon Washington strikes trade deals with other countries, how the tariffs affect domestic and global economies and how long it could take for the tariffs' effects to be seen in hard data. At the two-day meeting ending on Thursday, the BOJ is widely expected to keep short-term interest rates steady at 0.5 per cent. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Markets are focusing on the bank's quarterly outlook report and Governor Kazuo Ueda's post-meeting news conference for clues on the timing of the next rate hike. A Reuters poll, taken before last week's Japan-US trade deal announcement, showed a majority of economists expect the BOJ to raise rates again by year-end. In the quarterly report, the BOJ is likely to revise up this fiscal year's inflation forecast due to persistent rises in rice and other food costs, sources have told Reuters. The BOJ may also tweak its current view that risks to the price outlook were skewed to the downside, and offer a less gloomy view on the economy compared with the current one focused on tariff-induced risks, according to separate sources. The board is likely to maintain its view that inflation will durably hit its 2 per cent target in the latter half of its three-year projection period running through fiscal 2027, they said. In current projections made on May 1, the BOJ projects core consumer inflation to hit 2.2 per cent in fiscal 2025, before slowing to 1.7 per cent in 2026 and 1.9 per cent in 2027. Japan struck a trade deal with President Donald Trump last week that lowers US tariffs for imports of goods, including its mainstay automobiles, easing the pain for the export-reliant economy and clearing a key hurdle for further BOJ rate hikes. The positive development contrasts with the gloom that surrounded the economy on May 1, when the BOJ produced its current estimates amid heightened market volatility caused by Trump's April announcement of sweeping 'reciprocal' tariffs. The BOJ exited a decade-long, massive stimulus last year and raised its short-term policy rate to 0.5 per cent in January on the view that Japan was progressing towards durably achieving its price goal. With rising food costs hurting households and keeping inflation above its 2 per cent target for three years, some hawkish board members have highlighted mounting price pressures that could justify resuming rate hikes. REUTERS
