Morning Bid - Japan returns from upside-down world, AI fizzes
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[March 19, 2024] A
look at the day ahead in U.S. and global markets from Mike Dolan
If just two years ago, you'd imagined the day the Bank of Japan ended
its negative interest rate era, you'd probably not have put the yen near
34-year lows through 150 per dollar or the Nikkei stock index within 2%
of record highs.
Yet, here they are - and Bank of Japan policy rates are positive again
for the first time since 2016 after the BOJ delivered its first rate
hike in 17 years at Tuesday's meeting.
And it went big in its dismantling of its extraordinarily easy money
regime - removing formal bond yield caps and purchases of stock funds.
Of course the move had been telegraphed for weeks, if not months, and
only the timing was at issue.
And perhaps the market's eventual takeaway from the meeting was an
emphasis on policy remaining "accommodative" with rates stuck around
zero as a fragile economic recovery retains large rate gaps with other
G7 nations.
The BOJ said it will continue its JGB purchases at broadly the same
amount as before - which pushed yields lower on the day - even though it
will scale back the maximum limit of its purchases.
Still the prospect of further hikes were left on the table. "If trend
inflation heightens a bit more, that may lead to an increase in
short-term rates," said BOJ Governor Kazuo Ueda said, without
elaborating on the likely pace and timing of further moves.
And business welcomed the move, with the chair of Japan's biggest
business lobby Keidanren describing it as "the appropriate policy
decision at the appropriate time".
But with the long-awaited hike now out of the way, dollar/yen surged to
150.62 - within 1% of 2022's peaks. And the Nikkei gained 0.6% - about
1% from its record high set earlier in the month.
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In the background, Australia's dollar weakened and shares there ended
higher as the Australian central bank signaled greater confidence in
inflation returning to its target range after leaving policy rates
unchanged at 12-year highs of 4.35%.
And of course all now spins into the Federal Reserve's two-day meeting,
which kicks off later on Tuesday.
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Traders work on the floor of the New York Stock Exchange (NYSE) in
New York City, U.S., August 15, 2023. REUTERS/Brendan McDermid/File
Photo
![](http://archives.lincolndailynews.com/2017/Jul/22/images/ads/current/rohlfs_lda_072017.png)
The rates and currency market mood is hawkish going into the Fed
meeting, although there was some relief on Treasury yields early
Tuesday and spiky oil prices ebbed a bit.
Thanks largely to the yen swoon, the dollar was higher across the
board, hitting its highest in almost three weeks.
But despite the cloudy U.S. interest rate picture, the buzz about
artificial intelligence kept stock indexes buoyed.
Google's parent Alphabet jumped on a media report that Apple is in
talks to build Google's Gemini AI engine into the iPhone.
Nvidia shares added almost 1% as it kicked off its annual developer
conference as investors waited for new chip announcements from Chief
Executive Jensen Huang.
But Super Micro Computer, which joined the S&P 500 on Monday, gave
up earlier gains to close down 6.4%, making it the biggest
percentage decliner on Monday. The stock, which has rallied
furiously recently on bets it would benefit from AI, is still up
more than 252% for the year-to-date.
And in a good day for mega caps, even Tesla climbed 6%, leading S&P
500 percentage gains, after the electric carmaker said it would soon
increase the price of its Model Y EVs in parts of Europe.
But the tech and megacap flurry disguised a bad session for small
caps, with the Russell 2000 ending down 0.7%.
Key diary items that may provide direction to U.S. markets later on
Tuesday:
- U.S. Feb housing starts, Jan TIC data on foreign holding of
Treasuries; Canada Feb consumer price data
- U.S. Federal Reserve's Federal Open Market Committee starts
two-day policy meeting, decision Wednesday
- US Treasury auctions 20-year bonds, 12 month bills
(Editing by Bernadette Baum)
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