Asian shares follow Wall Street higher, yen weak ahead of Japan vote
Overnight, the S&P 500 and the Nasdaq again closed at record highs as U.S. data including retail sales and jobless claims beat forecasts, indicating a modest improvement in the economy that should give the Federal Reserve time to gauge the inflation impact from higher U.S. tariffs.
Streaming giant Netflix (NFLX.O), opens new tab beat Wall Street's lofty expectations for second-quarter earnings in part due to a weaker U.S. dollar. Its share price, however, fell 1.8% in after-hours trading, with analysts saying much of the growth had already been priced in.
European share markets are set for a higher open, with EUROSTOXX 50 futures 0.4% higher. Wall Street futures , were up 0.2%.
On Friday, MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab rose 0.7% to its highest since late 2021, bringing the weekly gain to 1.5%.
Japan's Nikkei (.N225), opens new tab, however, slipped 0.2%, and the yen slipped 0.1% to 148.77 per dollar and was down about 0.7% this week after polls showed Prime Minister Shigeru Ishiba's coalition was in danger of losing its majority in the election on Sunday.
Data on Friday showed Japan's core inflation slowed in June due to temporary cuts in utility bills but stayed beyond the central bank's 2% 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."
Chinese blue-chips (.CSI300), opens new tab rose 0.4% while Hong Kong's Hang Seng index (.HSI), opens new tab gained 0.8%.
The Tapei-listed shares of TSMC (2330.TW), opens new tab, the world's main producer of advanced AI chips, rose 1.3% after posting record quarterly profit, though it said future income might be affected by U.S. tariffs.
In the foreign exchange market, U.S. the dollar was on the back foot on Friday, having bounced 0.3% overnight against major peers on the strong economic data. For the week, it is headed for a second successive gain of 0.7%, bouncing further 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.
Fed funds futures imply next to no chance of a move on July 30, while a September rate cut is just about 62% priced in.
Treasury yields were slightly lower in Asia. Benchmark 10-year U.S. Treasury yields slipped 3 basis points to 4.4375%, having moved little overnight. Two-year yields also edged 2 bps lower to 3.8944%.
Oil prices extended gains on Friday, after drones strikes on Iraqi Kurdistan oil fields fuelled supply concerns.
U.S. crude rose 0.4% to $67.79 per barrel and Brent also rose 0.4% to $69.77 a barrel. They, however, lost about 0.7% for the week.
Spot gold prices were steady at $3,337 an ounce but were set for a 0.5% weekly loss.
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The Guardian
an hour ago
- The Guardian
Trump calls Fed chair ‘a numbskull' who ‘makes it difficult for people to buy a house'
Donald Trump has renewed his attacks on Jerome Powell, calling the US central bank chair a 'numbskull' and accusing him of 'making it difficult for people, especially the young, to buy a house'. The US president accused Powell of preventing the Federal Reserve from lowering interest rates to make housing more affordable. Recent figures have shown US house prices rising to all-time highs after a decline during the winter and early spring. Powell, referred to as 'Too Late' by the president on his own social media platform Truth Social, is expected to respond on Friday to calls by the White House for an inspection into renovation costs at the central bank's headquarters in Washington. Trump grabbed the opportunity to try to embarrass the Fed chief after it was revealed that a planned $1.9bn (£1.4bn) refurbishment was about $600m over budget. Powell has been in post since 2018, after Trump nominated him to succeed Janet Yellen during his first term as president. On Friday, Trump said it was 'truly one of my worst appointments', before heaping blame on Joe Biden. 'Sleepy Joe saw how bad he was and reappointed him anyway – and the Fed board has done nothing to stop this 'numbskull' from hurting so many people. In many ways the board is equally to blame!' he wrote. At its most recent meeting the Fed held interest rates at a level between 4.25% and 4.5%, with Powell citing the likely impact of the president's import tariffs on inflation as one of the main reasons. US inflation accelerated to 2.7% in June, up from 2.4% in May, according to the consumer price index, with business leaders blaming tariffs on imported goods for the increase in prices. Trump has consistently attacked Powell and hinted that he could take the unprecedented decision to sack him, although the White House budget director, Russell Vought, said on Thursday that the president was unlikely to fire the Fed boss. The supreme court recently suggested that the president could not fire the Fed chair. Vought said the administration wanted to have an on-site inspection of the Fed's troubled $2.5bn building renovations. 'I think the president was pretty clear … he's unlikely to fire the chair, but he has substantial concerns with regard to how he's managed the Fed,' he said, indicating that Powell could see out his term of office, which ends next May. Christopher Waller, one of seven governors on the Fed board, said he would accept the job of Fed chair if asked by Trump. His intervention, the first by one of Powell's colleagues, came just hours after he joined the president in calling for a rate cut this month. Waller said: 'In 2019 the president contacted me and said: 'Would you serve?' And I said yes. If the president contacted me and said 'I want you to serve', I would do it. But he has not contacted me.' Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion This month Trump took the unusual step of writing to Powell to tell him how weak he thought the central bank boss was when other central banks, notably the European Central Bank and the Bank of England, had cut interest rates. 'You have cost the USA a fortune and continue to do so. You should lower the rate – by a lot!' Trump wrote to Powell. In his latest social media post, he wrote: ''Too Late' and the Fed, are choking out the housing market with their high rate, making it difficult for people, especially the young, to buy a house. 'The USA is Rockin', there is VERY LOW INFLATION, and we deserve to be at 1%, saving One Trillion Dollars a year on Interest Costs. I can't tell you how dumb Too Late is – So bad for our Country!' A meeting of finance ministers from the G20 gave Powell implicit backing by saying it was crucial to protect the independence of central banks. The final communique on Friday after two days of meetings in Durban, South Africa, attended by the UK chancellor, Rachel Reeves, stressed the importance of central banks being allowed to achieve their mandates without political interference. It said: 'Central banks are strongly committed to ensuring price stability, consistent with their respective mandates, and will continue to adjust their policies in a data-dependent manner. Central bank independence is crucial to achieving this goal.' The US treasury secretary, Scott Bessent, was missing from the event after a disagreement with Cyril Ramaphosa's South Africa administration, which Trump has accused of failing to tackle the killing of white farmers – without providing evidence to support the claim.
Daily Mail
an hour ago
- Daily Mail
Is now the time to view luxury brands as cheap thrills?
Fear stalks the luxury goods industry which brings us brandy, champagne, baubles, £10,000 handbags and £150,000 watches – not to mention £520 bucket hats for this summer's 1990s style revival, sparked by the Oasis concerts. Shares in industry behemoth LVMH are down by more than 30 per cent over the past 12 months to €472 (£409) as a result of a slump in demand and factors such as the availability of 'super-fake' bags – that can only be distinguished from the real thing by X-ray technology. In April 2023 shares in LVMH, which owns Dior, Louis Vuitton, Moet Hennessy, Sephora, Tiffany, Tag Heuer and 69 other brands, reached €903 (£783). LVMH boss Bernard Arnault became the world's richest man; he's now number eight in the league. A fightback is currently being led by LVMH and the other names in this €364billion (£316billion) industry of gloss and glamour – Burberry, EssilorLuxottica, Hermes, Kering and Richemont – hinting that it may be time to start bargain shopping for luxury goods shares. But the performance of an Asian newcomer suggests that these European players will have to muster all their creativity to regain their lustre. Over the past year, there has been a 928 per cent leap in the shares of Laopu Gold, a Chinese group founded in 2009. The company's jewellery and watches embody 'guochao' – that is, heritage, a quality currently most appealing to Chinese consumers. Since China is the world's largest luxury goods market, this homegrown bling movement is more bad news for LVMH and the rest. It also indicates what Gillian Diesen of Pictet Asset Management calls a shift to 'hard luxury' that is more about lasting quality. Laopu pieces are made of 24-carat gold, a plus when the gold price is forecast to rise further. LVMH and the other European players have already lost about 50m customers worldwide in the past two years as post-pandemic 'revenge spending' has receded against a tough macro-economic background. Tariffs may exacerbate the situation in the US. In the worst-case scenario, management consultants Bain estimates that the sector could shrink by a further 5 to 9 per cent this year. The companies' forthcoming second-quarter results will underline the headwinds they face. But Diesen argues that this will draw attention to luxury goods shares. Investors looking to diversify will conclude that the valuation of some companies is 'untenably low'. Diesen says: 'Despite low short-term expectations, there is little reason to suggest that premium brand spending will not return to its normal long-term average levels of growth, even in China. 'These companies have high gross profit margins, strong balance sheets, plenty of pricing power and long heritage which should see them through more volatile times.' The allure of a £10,000 bag may be lost on you, but you are gambling on the luxury goods sector's ability to adapt and innovate if you have savings in such popular funds as Finsbury Growth & Income and Fundsmith, which hold Burberry and LVMH respectively. The Pictet Premium Brands fund owns EssilorLuxottica, the Ray-Ban sunglasses business, and Hermes. If you want to bet on luxury, here's what you need to bear in mind: WHAT'S GONE WRONG? 'A lack of innovation and excessive price rises' are the key reasons for the travails of the luxury goods groups, says Mamta Valechha, analyst at Quilter Cheviot. Some items are now vastly more expensive. The Lady Dior bag, the style beloved of Princess Diana, costs about 75 per cent more than in 2019, and the largest version is £5,600. Valechha says: 'Many of the aspirational consumers who fuelled the post-pandemic sales explosion are now questioning the perceived value of these goods, with even names such as Chanel finding there is a limit to its pricing ambitions.' The disaffection among Gen Z consumers over pricing has boosted the popularity of 'super-fake' bags, which are said to look the real thing and cost £500 rather than £5,000. LVMH and other companies are trying to catch more of this generation by launching relatively more affordable, entry-level pieces. A £480 Dior travel pouch provides the look for less. There's also that £520 bucket hat for a 1990s Oasis vibe. BURBERRY At this week's annual general meeting chief executive Joshua Schulman pledged to concentrate on those areas where it has 'authority', which is the industry-speak for design flair and pricing power. At Burberry this means a focus on its trenchcoats and other outerwear, including Oasis-style hats and parkas, rather than expensive handbags. Schulman said: 'I'm optimistic that our best days lie ahead.' At 1317.5p, the shares are 21 per cent lower than three years ago but – 75 per cent higher over the past 12 months. Analysts consider it a 'hold'. ESSILORLUXOTTICA This French-Italian company is not only the world's number one manufacturer of spectacles, but also at the forefront of technology with its AI-powered glasses. Such is the potential of these wearable devices that Meta, owner of Instagram, Facebook and Whatsapp, has acquired a stake. Shares are €244 (£211.50) but analyst Louise Singlehurst, of Goldman Sachs, has set a target price of €285 (£247). HERMES The €251billion (£217.5billion) French house makes the Kelly and Birkin bags that are a badge of wealth and continue to be deemed to be worth their £10,000-plus price tag. Earlier this year Hermes became, briefly, a more valuable company than LVMH. There are now some questions as to whether it can continue to defy headwinds. Yet, the majority of analysts still reckon the shares – currently at €2,367 (£2,051)– to be a 'buy'. KERING Shares in Kering have tumbled by 16pc since the start of the year and are now about 60 per cent down since 2022. The cause of the French company's woes are the problems at its Gucci and Saint Laurent divisions. But Luca de Meo, the former chief executive of Renault, is taking the top job with a mission to turn around its fortunes. For the moment, analysts are unconvinced he can quickly arrest the decline, which means that these shares represent a gamble on his talents. LVMH Eleven of the analysts who follow LVMH rate it a 'hold', but nine have a 'buy' recommendation, based presumably on the assessment that Arnault will use his considerable ingenuity to revive the business. The 76-year old, known as the 'wolf in cashmere', has always prided himself on a rigorous approach, saying that 'a company, even if it's successful, should be managed as if it could go under within 12 months'. I plan to take a flutter on the basis that Arnault will wish to bow out on a high. His planned retirement age seems to be 85. RICHEMONT This Swiss group is best known for its jewellery 'houses' – Cartier and Van Cleef & Arpels. These brands were benefiting from the weakness of the yen which encouraged visitors from elsewhere to splash the cash in Japan. Figures this week, however, showed that these purchases had slowed thanks to the strengthening of the yen. But sales elsewhere have been strong, suggesting that shoppers perceive the jewellery to be more of a store of value at present than clothing. If you want to back this trend, the analysts who rate Richemont a 'buy' have set a target price of 224 Swiss francs (£208), against the current 141.8 (£132).
Daily Mail
an hour ago
- Daily Mail
MAGGIE PAGANO: Trump playing with fire over Fed boss
When President Donald Trump first floated the idea of firing Jerome Powell – the Federal Reserve chairman – the US financial markets went haywire. Share prices fell sharply, bond yields shot up and the dollar slumped to a three-year low. That was back in April. Even Trump was trumped by the market rout and, in classic style, has rowed back, denying the reports. Since then, markets have settled down, persuaded that even Trump would not dare mess with the central bank's sacred independence. They reckoned his threats were yet another example of how the President often backs down on his more outrageous ultimatums. Or 'Taco', as it's been called: Trump Always Chickens Out. Or has he? This week Trump stepped up his war with the man he blames for keeping interest rates too high. According to reports, the President sought and got support from House Republicans to sack Powell, waving a draft letter around announcing his departure. It was also claimed that Trump had changed tack. That his new strategy is to sack Powell over his handling – or alleged mishandling – of the renovation of the Fed's HQ in Washington. The restoration is around $600m (£447m) over the $1.9billion (£1.4billion) budget. Well, you can imagine the uproar. Trump has, of course, denied writing a letter. But he did post on Truth Social, his social media site, on Tuesday night after the press stories: 'Consumer Prices low. Bring down the Fed rate, now!!!' Trump has also since said it's 'highly unlikely' he would do anything to remove Powell, unless 'fraud' is involved. Privately, lawyers have warned the President that any attempt in the courts to remove the Fed chair would not succeed. That has never stopped the President before. So far he hasn't ruled out such a move or, indeed, stopped his criticism. Only yesterday he called the chairman a 'numbskull', one who has made buying a house too expensive for most Americans and has kept interest payments on its huge debt too high. US rates are 4.5 per cent. In a highly unusual move, Trump wrote to Powell earlier this month, ticking him off for not cutting rates as other central bankers have done, name-checking the Bank of England and the European Central Bank. In that subtle way he has, Trump wrote: 'You have cost the USA a fortune and continue to do so. You should lower the rate – by a lot!' Yet, surprisingly, Trump's threats this time around have barely dented Wall St. Quite the reverse. Share prices are cruising along to record highs and bond prices have barely flinched. The names of Trump's favourite candidates to replace Powell – Kevin Hassett and Kevin Warsh – are openly being discussed. The question is why is there such a different reaction to his April outburst. Is it because the markets still believe Trump dare not cross the red line breaking the Fed's independence? That he will do a Taco? Or do they secretly hope that Powell's credibility is now so bruised that he might just throw in the towel? You can't blame him if he does. But the Fed chairman is far more likely to keep fighting, especially as he's due to retire next May. Either way, the pressure on the Fed to cut interest rates at its September meeting is now on big-time. It would be the right decision, and a move that would help the Bank of England to keep cutting. What's for sure is that the annual central bankers' shindig at Jackson Hole in the US at the end of August promises to be much more fun than usual.
