AI Boom Powers Market Surge; Japan’s Yen Intervention Brings Volatility
Market Overview and Key Developments
By Jamie McGeever
ORLANDO, Florida, April 30 (Reuters) - U.S. stocks surged on Thursday to close a remarkable month on a high as strong tech earnings and investment figures suggested that the AI boom has much further to run, while the yen had its best day since 2022 after Japan intervened in the currency market.
In my column today, I look at the spike in central bank dissents, which points to greater uncertainty, murkier messaging and higher market volatility. Just what investors and businesses don't need right now.
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
Recommended Reading
1. Japan intervenes to counter currency weakness, sources say; yen surges
2. AI-related investment, rebound in government spending lift U.S. economy in first quarter
3. Google Cloud pulls ahead as Big Tech's AI bet swells to $700 billion
4. ECB keeps rates unchanged but June hike firmly on table
5. Pivotal U.S.-Iran war deadline approaches with no end in sight for conflict
Today's Key Market Moves
Stock Market Performance
• STOCKS: Asia lower, Nikkei -1%, KOSPI -1.4%. Europe up strongly, STOXX 600 +1.4%, FTSE 100 +1.6%. Wall Street leaps, S&P 500 +1%, Russell 2000 +2%.
Sectors and Shares
• SECTORS/SHARES: Every S&P 500 sector except tech rises. Communications services +4% to record high. Qualcomm +15%, Alphabet +10%, Eli Lilly +10%. Meta -9%, Nvidia -5%.
Foreign Exchange
• FX: Yen soars on Japanese intervention, biggest rise since 2022. This drags the dollar index down 1%, one of its steepest falls in a year.
Bonds and Yields
• BONDS: 10-year JGB yield above 2.5% for first time since 1997, European and U.S. yields end the day lower. U.S. yields down 5 bps at short end, curve bull steepens.
Commodities and Metals
• COMMODITIES/METALS: Oil slips, July futures replace June as benchmark front month contract.
Today's Talking Points
Japan’s Yen Intervention
Market Reaction and Effectiveness
* Japan shows its hand
Japan intervened in the FX market buying yen on Thursday, according to sources, the first intervention in nearly two years. Authorities got bang for their buck, as the dollar plunged to 155 yen from over 160 yen. The yen ended the day 2.5% higher, its best day since 2022.
How effective will this be? Traders are holding the biggest net short yen position since July 2024 - when Japan last intervened - so the rally may have legs. Dollar/yen at 150.00 yen anyone? But if the Fed turns more hawkish than the BOJ, "fundamentals" could soon push the yen lower again.
Central Bank Policy Outlook
Interest Rates and Inflation
* Hawks waiting to pounce
The ECB and BoE on Thursday rounded off a remarkable week for central banks, both keeping rates on hold but ready to hike if war-driven price pressures continue to build. Ditto the Fed and BOJ earlier this week.
U.S. and euro zone inflation figures on Thursday, and the latest Cleveland Fed inflation "Nowcast" update - annual PCE running at a punchy 3.7% - all point in that direction. Up next is Tokyo CPI on Friday.
April Market Performance
Major Index Moves and Outlook
* April scores on the doors
April drew to a close on Thursday, and what a month. South Korea's KOSPI surged 30%, its best month since 1998; the Nasdaq's 15% rise was the biggest since 2020, the 10-year JGB yield topped 2.5% for the first time since 1997. Brent crude? It actually fell.
What's in store for May? U.S. non-farm payrolls are out next week and after today's jobless claims - the lowest since 1969 - and Q1 business investment figures, they could be worth watching more than usual. The week after, U.S. President Donald Trump goes to China and Kevin Warsh replaces Jerome Powell at the Fed. All against the backdrop of the Iran war, energy shock, AI boom, and Japan's FX intervention. Buckle up.
What Could Move Markets Tomorrow?
• Developments in the Middle East
• Energy market moves
• Australia PPI inflation (Q1)
• Japan Tokyo CPI inflation (April)
• South Korea trade (March)
• UK PMI (April)
• Bank of England chief economist Huw Pill speaks
• U.S. ISM (April)
• U.S. earnings include Berkshire Hathaway, Exxon Mobil, Chevron
Additional Information
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(Reporting by Jamie McGeever; Editing by Nia Williams)
