A look at the day ahead in European and global markets from Gregor Stuart Hunter
Summer’s officially over. Buckle up!
The yen has surged to a seven-month high against the U.S. dollar, with carry trades starting to buckle as markets ramp up expectations for a path of rate hikes from the Bank of Japan.
The Japanese currency traded as much as 1% firmer at 152.89, its strongest since February, just weeks after hitting a four-decade nadir that prompted a rare joint intervention by U.S. and Japanese authorities to steady the currency.
The yen got a further lift from data released on Tuesday showing Japan’s economy grew faster than initially estimated in the April to June quarter from the previous three months, alongside real wage growth figures that cemented expectations that the Bank of Japan will continue hiking interest rates next week and well into next year.
The gains for the currency weighed on a jittery stock market, with the Nikkei 225 up 0.3% and MSCI’s broadest index of Asia-Pacific shares outside Japan 0.5% higher, led by a 2.3% gain for shares in South Korea, which competes with Japan in memory chip production. S&P 500 e-mini futures were 0.1% lower.
Investor confidence got a boost from a pickup in the pace of Chinese export growth during August, accelerating from the previous month. Imports also soared, albeit by less than forecast. Copper prices extended a recent record high on Tuesday as concerns of supply shortages grew.
In early European trades, pan-region futures were up 0.1%, German DAX futures were 0.1% higher, and FTSE futures were flat.
In the Middle East, despite assurances from U.S. President Donald Trump at the start of June that the Strait of Hormuz would be open before the U.S. Labor Day holiday, that date came and went on Monday with the status of the trickle of marine traffic through the strategic waterway remaining ambiguous at best.
Meanwhile Iran threatened the United States with “economic warfare” on Tuesday and said it had fired an advanced missile at U.S. warships, pushing Brent crude 0.4% higher to $97.49, marking its third day creeping closer to the $100 a barrel mark that has eluded the oil benchmark since May.
Perhaps Trump should have referred to May 1, when many countries outside the U.S. celebrate the labour movement. In keeping with that frazzled spirit of the times: Workers of the world, remember not to wear white (after Labor Day).
Key developments that could influence markets on Tuesday:
Company earnings:
Casey’s General Stores, GameStop Corp
Economic events:
Germany: Exports, imports, trade balance for July
France: Current account and trade balance for July
(Editing by Kate Mayberry)
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