Global shares and bonds dipped on Friday after a week of aggressive central bank tightening, with the Bank of Japan and the Federal Reserve both raising rates. European stocks fell while US futures rose on tech strength, even as the yen headed for its worst weekly slide against the dollar in two years.
Global shares and bonds slipped on Friday as markets closed out a turbulent week defined by central banks racing to tame inflation. The Bank of Japan's well-telegraphed hike still failed to support the yen.
Bank of Japan hike fails to lift the yen
The Bank of Japan raised rates to a 31-year high of 1.25%, a decision two board members opposed. Yet the yen headed for its biggest daily slide since mid-February, with the dollar up 1% to 157.54 yen. BOJ Governor Kazuo Ueda said underlying inflation is approaching 2% and that the bank's policy focus has shifted, though most board members still view policy as accommodative even after the hike.
The Federal Reserve added pressure on the yen after it raised rates for the first time in three years on Wednesday and switched to a more aggressive stance on inflation. As a result, the yen is on course for its worst weekly performance against the dollar in two years, down 2.6%. Chris Scicluna, head of research at Daiwa Capital Markets Europe, said the Fed's move raises the risk the yen weakens further. According to Reuters: "That certainly should keep the door open to further tightening", he said. He added another rate hike to 1.50% before year-end looks like a decent bet.
Hawkish central banks circle the globe
September has brought the biggest rise in average interest rates across the G10 since July 2023, with four central banks raising rates and others signaling they may follow. The Bank of England left UK rates unchanged on Thursday but said it may need to hike if the war in the Middle East drags on. The European Central Bank also flagged further tightening last week as it raised rates, while Australia's top central banker said some of the upside inflation risks policymakers had flagged appear to be materializing.
Stocks split as oil retreats
A pullback in oil prices offered little relief for stocks or bonds, which registered modest losses. Stocks in Europe fell 0.3% on the day, while US stock futures rose 0.3% to 0.6%, led by strength in tech shares that shook off earlier warnings from top AI executives about unchecked AI development.
Brent crude futures fell as much as 2.8% to $101.92 after a Reuters report that China asked Tehran to help rein in the Houthis, putting crude on course for a 2% weekly drop even as physical prices hold near $120. Bond prices edged up after a brutal selloff this week pushed the 10-year US Treasury yield past 5%, its highest since 2007, before it eased back to 4.93%.
Source: Investing.com
Trading involves risk.
Risk Disclaimer
