Yen Hits 6-Week High on Rate Hike Bets

The yen surged 1.1%, breaking below 150 per dollar, as Tokyo’s hotter-than-expected inflation data raised bets for a Bank of Japan rate hike next month, with swaps pricing a 60% chance of a move. Nasdaq futures climbed 0.5% in Asian trading, while 10-year Treasury yields fell to a one-year low of 4.238%. In Europe, investors await eurozone inflation data, with expectations of a 2.3% reading, and focus shifts to French political tensions, where a no-confidence vote looms over the government.

Equities

The FTSE 100 edged up 0.08% to 8,281.22 on Thursday, supported by a strong performance in the insurance sector. Direct Line surged 41% after rejecting a £4.16 billion takeover bid from Aviva, stating the offer undervalued the company. Aviva’s shares dipped 2.3% in response. Meanwhile, Sainsbury’s rose 3.1% as J.P. Morgan upgraded the supermarket chain’s shares to “overweight” from “underweight.” Spirax-Sarco Engineering climbed 3.9% following positive analyst ratings. Dr Martens gained 11.8% after reporting better-than-expected first-half results. However, Energean fell 8.6% to the bottom of the FTSE 250 after cutting its full-year production forecast.

In the US, major indices closed lower on Wednesday. The Nasdaq fell 0.59%, the S&P 500 declined 0.38%, and the Dow Jones dropped 0.31%. Technology stocks led the losses, with Dell down 12% and HP falling nearly 6% following weak quarterly forecasts. The broader tech sector was weighed down further as Nvidia and Microsoft saw declines, and the Philadelphia Semiconductor Index dropped 1.8%.

Workday slipped 6.2% after projecting lower-than-expected fourth-quarter subscription revenue due to reduced client spending. Despite the declines, advancing stocks outnumbered decliners on the New York Stock Exchange, with 406 hitting new highs compared to 54 new lows.

Economic data influenced market sentiment as US consumer spending rose solidly in October, but inflation remained stubbornly high. Traders expect a 25 basis point rate cut at the Federal Reserve’s December meeting but anticipate no changes in January or March. Meanwhile, third-quarter GDP growth remained at 2.8%, and weekly jobless claims fell to 213,000.

Forex & Commodities

The yen surged 1.2% against the US dollar, reaching a six-week high at 149.77 yen, after Tokyo’s inflation data outpaced forecasts, fuelling expectations of a Bank of Japan rate hike in December. The core consumer price index for Tokyo rose 2.2% annually in November, exceeding the 2.1% forecast. The dollar index fell 0.2% to 105.79, pressured by declining US Treasury yields and holiday-thinned trading. Sterling strengthened to $1.27165, its highest since mid-November, while the euro advanced to $1.0570, approaching a one-week peak. The Chinese yuan climbed 0.26% offshore, reaching 7.231 per dollar, and the New Zealand dollar rose 0.45% to $0.5915.

Gold prices increased 0.8% to $2,662.78 per ounce, supported by a weaker dollar and geopolitical tensions, including renewed conflicts in the Middle East and Russia’s attacks on Ukrainian energy facilities. Despite the day’s rise, gold is set for a nearly 3% monthly decline, its worst since September 2023. Spot silver gained 1.4% to $30.69, while platinum and palladium rose 1.2% and 1.43%, respectively.

Oil prices edged up slightly amid concerns over supply risks. Brent crude futures increased by 0.1% to $73.38 a barrel, and West Texas Intermediate crude rose 0.7% to $69.17. These gains were tempered by OPEC+ delaying its meeting to December, with expectations of further production cuts.