Stocks rise, yen strengthens against dollar as intervention eyed
FILE PHOTO: A passerby walks past an electric monitor displaying various countries' stock price index outside a bank in Tokyo, Japan, March 22, 2023. REUTERS/Issei Kato/File Photo
NEW YORK, Jan 26 : Global stocks advanced for a fourth straight session on Monday as investors awaited earnings from a bevy of U.S. megacaps while the yen strengthened against the dollar as investors looked for any signs of intervention in the Japanese currency.
In addition, gold advanced to top $5,100 an ounce for the first time, as a swath of geopolitical tensions continues to weigh on the U.S. dollar.
On Wall Street, U.S. stocks closed higher, buoyed in part by gains in the S&P 500 communication services and tech sectors. Markets are also expecting earnings this week from heavyweight names that are part of the so-called Magnificent Seven such as Microsoft, Apple, Tesla and Meta Platforms, while the Federal Reserve is scheduled to release its policy statement on Wednesday.
"You're seeing communications and technology are trading well today (Monday) in advance of the earnings from a lot of the large companies," said Chris Zaccarelli, chief investment officer of Northlight Asset Management in Charlotte, North Carolina. "It seems like we're having an expansion in corporate profits and an expansion in the economy - so generally speaking, investors are cautiously optimistic and most likely looking forward to earnings season."
The S&P 500 materials sector also closed higher, as the rise in gold helped lift stocks such as Freeport-McMoRan and Newmont Mining, although the sector ended well off earlier highs. The materials sector has the second-highest earnings growth rate of any sector in the first quarter at 24.4 per cent, according to LSEG data.
The Dow Jones Industrial Average rose 313.69 points, or 0.64 per cent, to 49,412.40, the S&P 500 rose 34.69 points, or 0.50 per cent, to 6,950.30 and the Nasdaq Composite rose 100.11 points, or 0.43 per cent, to 23,601.36.
MSCI's gauge of stocks across the globe added 6.12 points, or 0.59 per cent, to 1,043.67 and was on track for a fourth straight session of gains, while the pan-European STOXX 600 index closed up 0.2 per cent, supported by gains in financial stocks ahead of bank earnings later in the week.
GOLD HITS RECORD HIGH
Spot gold rose 1.42 per cent to $5,053.37 an ounce after hitting a high of $5,110.50. It is up more than 17 per cent for the month.
"We now see gold reaching $6,000/oz by year-end, with the caveat that this is probably a conservative estimate and it could well go higher," analysts at Societe Generale said.
The Fed is widely expected to keep rates unchanged, according to CME's FedWatch Tool, while investors will monitor comments from Chair Jerome Powell for clues on the path of monetary policy.
The dollar index, which measures the greenback against a basket of currencies, shed 0.22 per cent to 97.01, with the euro up 0.48 per cent at $1.1883. Sterling strengthened 0.29 per cent to $1.368.
Against the Japanese yen, the dollar weakened 1.05 per cent to 154.09 after hitting its lowest since mid-November at 153.30 yen, after sharp spikes in the Japanese currency on Friday sparked speculation over a possible intervention. The New York Federal Reserve conducted rate checks on Friday, sources told Reuters.
Top Japanese authorities said on Monday they have been in close coordination with the United States on foreign exchange, which would mark the first coordinated intervention between the two countries in 15 years.
"While a cautiously hawkish stance from the (Fed) this week, along with resilient data could offer some support to the USD, any potential intervention in the yen market may worsen the already weak flow picture for the dollar," analysts at Barclays said in a note.
While markets will eye comments from Powell in the wake of the Fed policy statement, the meeting may be overshadowed by a Trump administration criminal investigation into the central bank chief, the president's effort to fire Fed Governor Lisa Cook and the coming nomination of a successor for Powell in May.
The yield on the benchmark U.S. 10-year note dipped 2.4 basis points to 4.215 per cent. A $69 billion auction of two-year notes was seen as strong by analysts.
JAPAN'S FISCAL CHALLENGE
The yen has been under pressure since Sanae Takaichi became Japan's prime minister in October, in part due to concerns over Japan's government debt that stands at more than double its economic output. A historic rise in market interest rates has raised fears for Japan’s ability to service its debt, but Takaichi has said she will cut taxes as she campaigns in a snap election set for February 8.
BOJ money market data released on Monday suggested there had been no intervention on Friday.
U.S. crude settled down 0.72 per cent to $60.63 a barrel and Brent settled at $65.59 per barrel, down 0.44 per cent on the day after climbing more than 2 per cent as investors assessed the impact on output in U.S. crude-producing regions from winter storms.
