World shares rise, U.S. yields weaken after inflation data, BOJ rate
tweak
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[July 29, 2023] By
Chibuike Oguh
NEW YORK (Reuters) -World shares rose while U.S. Treasury yields fell on
Friday as markets digested the Bank of Japan's decision to tweak its
ultra-loose monetary policy as well as data showing a continuing
moderation in annual U.S. inflation.
The Bank of Japan on Friday adjusted its yield curve control scheme,
offering to buy 10-year Japanese government bonds beyond the previous
0.5% target rate while keeping unchanged its benchmark short-term rate
at -0.1% and long-term bond yields at zero.
The move brings the BOJ more into line with other major central banks,
which have been aggressively hiking rates to reduce inflation. The U.S.
Federal Reserve and European Central Bank had announced interest rates
hikes this week, with markets expecting them to be nearing the end of a
rate-raising cycle.
U.S. inflation slowed considerably in the 12 months to June, with the
personal consumption expenditures price index rising by 3%, the smallest
annual gain since March 2021, data from the Commerce Department showed
on Friday.
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The MSCI All Country stock index, which tracks shares in nearly 50
countries, rose 0.72% to 705.13 points. The index has gained nearly 17%
year-to-date.
U.S. Treasury yields weakened after hitting two-week highs for most
maturities the previous session, with yields on benchmark 10-year
Treasury notes down at 3.957% while two-year yields fell to 4.8786%.
"I think the BOJ move turned out to be a whole lot less than what was
feared. It's basically a minor tweak and the market is coming around to
the fact that it is not really meaningful in terms of tightening," said
Garrett Melson, portfolio strategist at Natixis Investment Managers in
Boston.
On Wall Street, all three main indexes finished higher led by
technology, communication services and consumer discretionary stocks.
The Dow Jones Industrial Average rose 0.5% to 35,459.29, the S&P 500
gained 0.99% to 4,582.23 and the Nasdaq Composite added 1.9% to
14,316.66.
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A trader works on the floor of the New
York Stock Exchange (NYSE) in New York City, U.S., July 26, 2023.
REUTERS/Brendan McDermid/File Photo
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European stocks fell 0.2% after hitting a 17-month high on Thursday
when the ECB raised interest rates to their highest level in more
than two decades and left open the possibility of a pause at its
next meeting.
Overnight in Asia, the MSCI's broadest index of Asia-Pacific shares
outside Japan closed 0.42% higher, with Japan's Nikkei dropping
0.40%.
"Right now, the market fully realizes that it's all about how the
data unfolds. We're really in the midst of a material slow down in
inflation trends and at the same time growth is holding up well,
which is what you'd expect for the soft landing," Melson added.
The yen whipsawed in its most volatile trading session in months
following the BOJ's move while the dollar fell against a basket of
its major peers. The yen weakened 1.18% versus the greenback at
141.08 per dollar. The dollar index fell 0.059%, with the euro up
0.45% to $1.1022.
Oil prices settled higher, reaching the fifth straight week of gains
as investors were optimistic that healthy demand and supply cuts
will keep prices buoyantBrent crude settled 75 cents higher to
$84.99 a barrel, while U.S. West Texas Intermediate (WTI) crude
gained 49 cents to $80.58 a barrel.
Gold prices rose after a sharp fall in the previous session, helped
by a slight retreat in the dollar. Spot gold added 0.7% to $1,959.18
an ounce, while U.S. gold futures gained 0.66% to $1,958.50 an
ounce.
(Reporting by Chibuike Oguh in New York; Editing by Daniel Wallis
and Alistair Bell)
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