Wall Street set for tech boost, yen slides on BOJ gloom

CNA

01-05-2025

LONDON : Wall Street pointed higher on Thursday, with the downtrodden dollar also on the rise after gloomy Bank of Japan economic forecasts had yanked the yen lower, amid signs that so-called "U.S. exceptionalism" trades may not be dead after all.
May Day public holidays around the world, including much of Europe, meant trading was thin on volumes but with some lively moves.
Saxo Bank's John Hardy said that went right to the heart of recent questions about whether U.S. President Donald Trump's radical shake-up of the post-World War Two global order would end "U.S. exceptionalism" in markets - where U.S. assets are brought up on bets they will perform strongly.
"Yesterday you had Meta and Microsoft landing five gold-star earnings, so it just squeezes that recent narrative and the consensus to sell the dollar," Hardy said.
Despite news of a first quarterly contraction in the U.S. economy in three years, Wall Street had made a sprint finish on Wednesday and the Nasdaq was expected to open nearly 2 per cent higher after strong Microsoft and Meta earnings had eased some of recent "Magnificent Seven" angst.
Japan's tech-heavy Nikkei had followed it up in Asia with a more than 1 per cent jump although with London's FTSE virtually stationary in Europe, MSCI's 47-country world stock index was still in the red for now.
It wasn't expected to be the case for too much longer though.
U.S. futures had the Nasdaq opening 1.8 per cent higher, and the S&P 500 up 1.2 per cent [.N]. Microsoft surged nearly 9 per cent in premarket moves after its bumper growth forecast while Facebook and Instagram owner Meta was up over 6 per cent after it had posted strong advertising revenues.
Meanwhile gold, which has soared as investors have run for cover this year, also drooped to its lowest level in two weeks as some chinks of light in the global trade war gave traders another reason to lock in some profit.
Thursday's move by the Bank of Japan to slash its forecasts and the resulting drop 1 per cent in the yen vs the greenback added to that. "Gold is off today too," Hardy said. "So all these things are linked".
DATA WATCHING
Most of Europe's bond markets were closed for the holiday. But UK 10-year Gilt yields - a proxy for borrowing costs - ticked lower and those on U.S. Treasuries were back down at 4.15 per cent, with analysts now pricing four U.S. interest rate cuts over the remainder of the year. [US/]
U.S. ISM manufacturing data was due later. That was also expected to come in weak given the trade war, while Friday has the monthly round of closely watched non-farm payrolls data.
Analysts at JPMorgan highlighted that S&P 500 has concluded the first 100 days of Trump's second term with its largest loss at the start of any president's term since Richard Nixon in 1973.
The dollar meanwhile is having its worst start to any year in over 35 years and the aftermath of the Plaza Accord when the U.S., West Germany, Japan, France, and Britain jointly agreed to devalue the currency.
And what about the next 100 days? "Attention will likely turn to landmark U.S. fiscal legislation and the budget reconciliation process, putting the spotlight on the U.S.' unsustainable fiscal trajectory and debt dynamics," JPMorgan's analysts said.
In the commodities markets, oil prices steadied at $61 a barrel after tumbling on Wednesday on the U.S. GDP drop and signs that Saudi Arabia, the world's biggest crude exporter, wants to increase its output this year.
"It will be interesting to see what happens if we continue to get a drum beat of negative data," Saxo Bank's Hardy said.
Also with a commodities slant, Ukraine's bonds rallied after its government signed a long-awaited deal to give the U.S. preferential access to some of its rare mineral resources.
It will establish a joint investment fund to help pay for Ukraine's reconstruction but analysts also see it as an important signal after February's ugly Oval Office spat between Trump and Ukrainian President Volodymyr Zelenskiy.
The deal will show "Russian leadership that there is no daylight between the Ukrainian people and the American people, between our goals," U.S. Treasury Secretary Scott Bessent said in an interview with Fox Business Network.