Sept 20 (Askume) – World shares were close to record highs on Friday after the Federal Reserve cut interest rates earlier this week, while the yen weakened on expectations of an imminent rate hike by Bank of Japan Governor Kazuo Ueda.
The dollar rose 0.8% to 143.75 against the yen after Ueda’s comments, after falling 0.6% to 141.74 against the yen after the Bank of Japan kept interest rates steady in line with widely expected measures .
The yen fell as the U.S. dollar did not say when the central bank might raise interest rates again, saying uncertainty about the U.S. economy and market volatility could influence its policy actions.
The US dollar generally stabilized after the Federal Reserve cut interest rates by 50 basis points earlier this week and assured investors that the sharp rate cut was a precaution, not an emergency response to recent labor market weakness .
“This announcement from the Fed is very dovish,” said Marija Weitman, head of equity research at State Street Global Markets, adding that it is watching the labor market carefully and is prepared to act if the market gets too pessimistic.
“Powell also said he doesn’t see inflation in the labor market — a positive message for risk assets.”
MSCI’s index of global shares (.MIWD00000PUS) rose 0.1% to a record high after rising 1.6% on Thursday. The weekly rise is expected to be 1.5%.
European shares (.STOXX) fell 0.6% from a two-week high, with car company shares the biggest losers, with weakness in China pushing Mercedes-Benz (MBGN.DE) to a more than two-month low after it missed its annual profit margin target.
Wall Street futures also fell after the S&P 500 hit a record high on Thursday.
China’s troubles
In China, the central bank kept its benchmark lending rate steady , dashing expectations of a rate cut . China’s blue-chip shares (.CSI300) rose 0.2% but remained close to a seven-month low hit earlier this week.
“The market is hopeful that the policy steps taken by the Chinese authorities will work. They have done a number of small things, but unfortunately they are not enough to reverse the slowdown in economic activity,” State Street’s Weetman said.
“It’s a huge source of global weakness.”
The onshore yuan hit a nearly 16-month high after a surprise move by the People’s Bank of China forced state banks to intervene to prevent a sharp rise in the yuan’s value.
Overnight, Wall Street finally had time to digest the Federal Reserve’s first rate cut. With more relief measures on the horizon, investors are betting on continued US economic growth and better-than-expected unemployment benefits data , boosting healthy sentiment in the labor market.
The market estimates that there is a 40% chance that the Federal Reserve will cut interest rates by 50 basis points in November and 73 basis points by the end of the year. Rates are expected to remain at 2.83% by the end of 2025, which is currently considered the Fed’s neutral forecast.
Sterling rose to $1.3300 against the dollar, having earlier hit its highest level since March 2022.
Data released on Friday showed UK retail sales rose 1% more than expected in August, and July’s increase was revised upward. The Bank of England kept interest rates steady on Thursday .
Commodities also posted weekly gains, with gold hitting a new record high of $2,610.10 an ounce and oil prices rising for a second consecutive week.
Brent crude futures fell 0.3% to $74.67 a barrel, but were still up 4.6% for the week.
