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Yahoo
5 days ago
- Business
- Yahoo
Dollar poised for fifth-straight monthly drop on trade, fiscal uncertainty
By Johann M Cherian SINGAPORE (Reuters) -The U.S. dollar softened on Friday, heading for its fifth-straight monthly decline as traders braced for further bouts of uncertainty around trade and fiscal health, while investors awaited a pivotal inflation report later in the day. The greenback had a choppy week, ending lower in the previous session after a federal court temporarily reinstated the most sweeping of President Donald Trump's tariffs, a day after a separate trade court had ordered an immediate block on tariffs. Trump on Thursday criticized the trade court's decision and said he hoped the Supreme Court would overturn the decision. The uncertainty around tariffs has taken a vice-like grip on the markets as investors flee U.S. assets looking for alternatives, worried that Trump's erratic policies could challenge the strength and outperformance of U.S. markets. "The (court) decision marks the beginning of a new source of uncertainty rather than the total closure of another," said Kyle Rodda, senior financial market analyst at noting the mood in the markets was cautious. Thursday's weekly jobless claims and economic growth data did little to placate worries of an economic downturn. The focus will be on the Federal Reserve's preferred inflation data - the personal consumption expenditure report - later on Friday. Much of the month was also dominated by worries about fiscal debt levels in developed economies, highlighted by weak appetitefor freshly issued longer-dated credit in the U.S. and in Japan. On Friday, the euro was slightly firmer at $1.1378, while the Swiss franc was also stronger at 0.8216 per dollar. The U.S. currency was set for monthly declines against the Swiss franc, the euro as well as the pound. The dollar index, which tracks the U.S. unit against a basket of six other currencies, was muted on the day. The index was set for a decline of 0.4% in May, on course for its fifth month in the red. On the flip side, markets have been taking notice of emerging market assets in recent weeks. An index tracking emerging market currencies has gained 2.2% for the month - its biggest one-month rise since November 2023. On Friday, the Japanese yen firmed 0.3% to 143.73 per dollar after data showed underlying inflation in Tokyo hit a more than two-year high in May, keeping alive the chances of further interest rate hikes from the Bank of Japan. However, the dollar is on track for a small monthly rise against the yen, its first after five previous months in the red. Markets are also on the lookout for any fresh clues on highly anticipated trade deals as the Trump-mandated July 9 deadline on tariffs draws near. Yields on longer-dated U.S. and Japanese bonds have eased this week, but still remain close to multi-month highs as investors question debt sustainability of the economies. Elsewhere, the Australian dollar eased a bit to $0.6429 and was set for a marginal rise in May. The New Zealand dollar last bought $0.5973. Sign in to access your portfolio
Mint
7 days ago
- Business
- Mint
Yen shrugs off tepid bond demand, dollar firms on trade deal hopes
By Ankur Banerjee and Johann M Cherian SINGAPORE (Reuters) -The Japanese yen was steady on Wednesday as ructions in the bond market kept the spotlight on the fiscal health of major economies, while the U.S. dollar was firm due to upbeat economic data and signs of easing trade tensions. The yen cut its losses to trade flat at 144.445 per dollar after dropping 1% on Tuesday in the wake of reports that Japan will consider trimming issuance of super-long bonds after a sharp rise in yields in recent weeks. The focus remained on the Japanese bond market, with demand at an auction of Japan's longest-tenor bonds on Wednesday falling to the lowest since July. The 40-year JGB yield spiked to a record high last week as worries about the debt load in Japan and other developed markets like the United States led to a selloff in the longest-dated bonds across the globe. On Wednesday, yields on Japanese government bonds were elevated as were U.S. Treasury yields, but the reaction in the market was fairly muted. "The (Japan) bond auction today is somewhat a little bit weaker than expected ... what this goes to show is that there's a lot of focus on the trajectory of debt and deficits globally," said Michael Wan, senior currency analyst at MUFG. The yen has gained nearly 9% so far in 2025 due to dollar weakness and safe-haven flows as investors flee U.S. assets in the wake of the erratic trade policies under President Donald Trump that have roiled markets. Frances Cheung, head of FX and rates strategy at OCBC, said the market reaction to the soft auction result had been muted so far, "probably as the bond sales had already been expected to suffer a bit after the latest richening in the bond." Fiscal worries are front of mind for investors after Moody's downgrade of the U.S. credit rating on a rising debt burden this month and soft demand for a U.S. Treasury Department bond auction last week that lifted 30-year Treasury yields above 5%. The euro was 0.2% weaker at $1.1306 after dropping 0.5% in the previous session as a bout of dollar buying hit the markets amid signs of possible trade deals and data showing U.S. consumer confidence in May was much better than expected. Still, new orders for key U.S.-manufactured capital goods plunged by the most in six months in April as the flip-flopping tariff salvos take a toll on the economy and businesses. The U.S. dollar was also boosted by Trump's decision to delay higher tariffs on the European Union over the weekend. EU officials have asked the bloc's leading companies and CEOs for details of their U.S. investment plans, two sources familiar with the matter told Reuters, as Brussels prepares to advance trade talks with Washington. Sterling last bought $1.34885 but stayed close to the three-year high touched on Monday. Worries about Britain's stretched finances have also weighed on investor appetite for the country's debt. The dollar index, which measures the U.S. currency against six rivals, was last 0.25% higher at 99.776 but is down 8% for the year as investors look for alternatives to U.S. assets. Investors will watch out for the April Personal Consumption Expenditure report - the Federal Reserve's preferred inflation gauge - on Friday that could help gauge the impact of Trump's trade policies. The Australian dollar last fetched $0.6436 as data showed consumer inflation held steady in April, leaving hopes for more interest rate cuts mostly intact. Last week, the Reserve Bank of Australia lowered interest rates by 25 basis points. The New Zealand dollar firmed 0.29% to $0.5966 after the country's central bank signalled it might be nearer to an end to easing than some in the market had hoped for as it cut rates by 25 bps as expected. (Reporting by Ankur Banerjee and Johann M Cherian in Singapore; Editing by Jamie Freed)
Yahoo
23-05-2025
- Business
- Yahoo
Emerging market equity funds lure investors fleeing overvalued U.S. assets
By Patturaja Murugaboopathy and Johann M Cherian (Reuters) -Emerging market equity funds are leading the global performance this year, bolstered by attractive valuations, years of under-positioning by investors and an easing of economic pressures after U.S. President Donald Trump's pause on tariffs. According to data compiled by LSEG, funds tracking equities in Latin America and emerging Europe have each gained around 24% so far this year, while broader emerging market equity funds are up 9.3%. Notably, equity funds focused on Morocco, Colombia, Greece, Brazil, and Portugal have each returned more than 30% this year. In comparison, U.S.-focused equity funds have returned just 0.17%, and global equity funds are up 6.8%. The outperformance of emerging markets marks a reversal after their years of lagging developed markets, during which U.S. equities, driven by the AI-led tech rally, delivered stellar index gains. This year, however, investors have been selling U.S. assets as worries over possible recession, fiscal instability and Trump's erratic policies shake their faith in the dollar. LSEG Lipper data showed dedicated EM equity funds have attracted $10.6 billion in inflows in the first five months of the year, a 43% increase over the same period last year. Malcolm Dorson, emerging markets senior portfolio manager at GlobalX, attributed this to how under-owned emerging market equities are. U.S. investors allocate just 3–5% to emerging markets, well below the 10.5% weighting in the MSCI Global Index and far short of their roughly 25% share of global market capitalisation, he said. "Allocators are dangerously short a deeply discounted and fast-growing asset class," he said. Analysts also highlight improving fundamentals. Latin American countries are largely insulated from tariffs, given their trade deficits with the U.S., while Asian economies are pivoting toward domestic consumption. Further, upgraded its rating on emerging market stocks to "overweight" from "neutral" earlier this week. It said it expects all central banks across developing economies, excluding Brazil, to ease monetary policy, which could increase economic activity and the attractiveness of equity markets. Gains in tech stocks have buoyed Chinese and Hong Kong equities, drawing renewed interest from foreign investors seeking to invest in artificial intelligence and other low-cost tech firms such as DeepSeek. There are opportunities in Mexico and Brazil, which have remained resilient despite trade tensions, according to Alison Shimada, portfolio manager at Allspring Global Investments. "The China consumer story is especially interesting right now," she said. "Beijing is very focused on stimulating the consumer economy. India may be overbought, but there are pockets of opportunity such as power companies and non-bank financials." At the end of last month, the MSCI Emerging Markets Index was trading at a forward 12-month price-to-earnings ratio (P/E) of 11.96, just below its 10-year average of 12.1. In contrast, the MSCI USA and MSCI World indexes were trading at 20.5 and 18.1, well above their 10-year averages of 18.8 and 16.9, respectively. (Reporting By Patturaja Murugaboopathy in Bengaluru and Johann M Cherian in Singapore; Editing by Janane Venkatraman) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
23-05-2025
- Business
- Yahoo
Emerging market equity funds lure investors fleeing overvalued U.S. assets
By Patturaja Murugaboopathy and Johann M Cherian (Reuters) -Emerging market equity funds are leading the global performance this year, bolstered by attractive valuations, years of under-positioning by investors and an easing of economic pressures after U.S. President Donald Trump's pause on tariffs. According to data compiled by LSEG, funds tracking equities in Latin America and emerging Europe have each gained around 24% so far this year, while broader emerging market equity funds are up 9.3%. Notably, equity funds focused on Morocco, Colombia, Greece, Brazil, and Portugal have each returned more than 30% this year. In comparison, U.S.-focused equity funds have returned just 0.17%, and global equity funds are up 6.8%. The outperformance of emerging markets marks a reversal after their years of lagging developed markets, during which U.S. equities, driven by the AI-led tech rally, delivered stellar index gains. This year, however, investors have been selling U.S. assets as worries over possible recession, fiscal instability and Trump's erratic policies shake their faith in the dollar. LSEG Lipper data showed dedicated EM equity funds have attracted $10.6 billion in inflows in the first five months of the year, a 43% increase over the same period last year. Malcolm Dorson, emerging markets senior portfolio manager at GlobalX, attributed this to how under-owned emerging market equities are. U.S. investors allocate just 3–5% to emerging markets, well below the 10.5% weighting in the MSCI Global Index and far short of their roughly 25% share of global market capitalisation, he said. "Allocators are dangerously short a deeply discounted and fast-growing asset class," he said. Analysts also highlight improving fundamentals. Latin American countries are largely insulated from tariffs, given their trade deficits with the U.S., while Asian economies are pivoting toward domestic consumption. Further, upgraded its rating on emerging market stocks to "overweight" from "neutral" earlier this week. It said it expects all central banks across developing economies, excluding Brazil, to ease monetary policy, which could increase economic activity and the attractiveness of equity markets. Gains in tech stocks have buoyed Chinese and Hong Kong equities, drawing renewed interest from foreign investors seeking to invest in artificial intelligence and other low-cost tech firms such as DeepSeek. There are opportunities in Mexico and Brazil, which have remained resilient despite trade tensions, according to Alison Shimada, portfolio manager at Allspring Global Investments. "The China consumer story is especially interesting right now," she said. "Beijing is very focused on stimulating the consumer economy. India may be overbought, but there are pockets of opportunity such as power companies and non-bank financials." At the end of last month, the MSCI Emerging Markets Index was trading at a forward 12-month price-to-earnings ratio (P/E) of 11.96, just below its 10-year average of 12.1. In contrast, the MSCI USA and MSCI World indexes were trading at 20.5 and 18.1, well above their 10-year averages of 18.8 and 16.9, respectively. (Reporting By Patturaja Murugaboopathy in Bengaluru and Johann M Cherian in Singapore; Editing by Janane Venkatraman)
Yahoo
22-05-2025
- Business
- Yahoo
Morning Bid: After bond market tremors, now for the data test
A look at the day ahead in European and global markets from Johann M Cherian Markets have been dealing with the steep selloff in Treasuries worried about the U.S. fiscal health, and in Europe the next test will be how businesses have been faring in the face of an uncertain trade environment. Manufacturing and services sector surveys for May will grab the spotlight on Thursday, and forecasts indicate that business activity in the eurozone and Germany has broadly been steady from the previous month. European earnings so far show that corporate health has been better than initially feared and stocks have been riding the tide of the temporary U.S. tariff pause and signs that China, a top customer for European firms, is striving to revive consumption. That has left the pan-European STOXX 600 outperforming the S&P 500 and the Nasdaq this year. The export-heavy German benchmark closed at a record high on Wednesday and is the best performing major stock market in the world. However, the path ahead would depend on whether European Union leaders can manage to negotiate trade deals with the U.S. and on the impact of the highly anticipated German fiscal stimulus package. European futures indicated a dour start to the day as risk sentiment was shrouded by lingering worries of how the U.S. could manage to finance its ballooning fiscal debt as investors exit U.S. assets. President Donald Trump's massive tax and spending bill cleared an important procedural hurdle in the Republican-controlled House of Representatives, setting it up for a vote that could take place within hours. Also worrying investors was the lacklustre auction of Treasury bonds that reinforced the "Sell America" narrative, weighing on not just the dollar but Wall Street as well, with traders already jittery after Moody's cut the U.S. triple-A credit rating last week. The yield on 30-year Treasury bonds US30YT=RR stayed above 5% after hitting a 1-1/2 year high earlier in Asian hours. However, not all assets were taking it on the chin. Bitcoin prices touched a fresh record high on improving sentiment around digital assets. The world's most valuable cryptocurrency has gained nearly 50% from the early April selloff, breaking above the $100,000 mark. Prices of gold were also making a comeback from a recent slip, given that investors perceive the precious metal to be a safe-haven favourite in times of uncertainty. Key developments that could influence markets on Thursday: Data: - Business activity surveys out of the eurozone, UK and the U.S. along with weekly jobless claims out of the United States - Remarks from European central bank policymakers including Philip Lane, Luis de Guindos expected - Bank of England Deputy Governor Sarah Breeden and Chief Economist Huw Pill to speak later in the day - Comments from U.S. Federal Reserve's Thomas Barkin due Trying to keep up with the latest tariff news? Our new daily news digest offers a rundown of the top market-moving headlines impacting global trade. Sign up for Tariff Watch here. Sign in to access your portfolio
