LONDON : World stocks were groggy on Thursday after a contraction in the U.S. economy, although Wall Street was pointing higher and the dollar sprang up as a Bank of Japan growth forecast cut blamed on U.S. trade tariffs yanked the yen lower.
May Day public holidays around the world, including much of Europe, meant trading was thin but that didn’t make it any less interesting.
Despite the Q1 U.S. GDP drop, Wall Street had made a sprint finish on Wednesday, while strong after-the-bell earnings from Microsoft and Meta doused some of recent negativity around “Magnificent Seven” trades.
Japan’s tech-heavy Nikkei followed it with a jump in Asia although with London’s FTSE stalled in Europe this wasn’t enough to keep MSCI’s 47-country world stock index out of the red.
U.S. futures were pointing higher again though [.N] for when trading resumes there later. Gold, which has soared as investors have run for cover this year, also drooped to its lowest level in two weeks as some chinks of light in the global trade war gave traders another reason to lock in some profit.
Saxo Bank’s John Hardy said the moves went right to the heart of recent questions about whether U.S. President Donald Trump’s radical shake-up of the post-World War Two global order would end so-called “U.S. exceptionalism” in markets.
“Yesterday you had Meta and Microsoft landing five gold-star earnings, so it just squeezes that recent narrative and the consensus to sell the dollar,” Hardy said.
Thursday’s move by the Bank of Japan to slash its forecasts and the resulting drop in the yen added to that. “Gold is off today too, so all these things are linked,” he said.
Most of Europe’s bond markets were closed for the holiday. But UK 10-year Gilt yields – a proxy for borrowing costs – ticked lower and those on U.S. Treasuries were back down at 4.15 per cent, with analysts now pricing four U.S. interest rate cuts over the remainder of the year. [US/]
U.S. ISM manufacturing data was due later. That was also expected to come in weak given the trade war, while Friday has the monthly round of closely watched non-farm payrolls data.
In the commodities markets, oil prices steadied at $61 a barrel after tumbling on Wednesday on the U.S. GDP drop and signs that Saudi Arabia, the world’s biggest crude exporter, wants to increase its output this year.
“It will be interesting to see what happens if we continue to get a drumbeat of negative data,” Saxo Bank’s Hardy said.
