Stocks were mixed this morning with the FTSE 100 declining 0.3 per cent to give back Tuesday’s modest gains. It is now essentially flat after last week’s big jump. The Dax has risen slightly, up 0.2 per cent, while in Paris shares are flat. Wall Street finished lower on Tuesday as the rally paused for breath, the S&P 500 declining 0.3 per cent. Copper, oil, iron ore are all weaker on China demand worry. Gold is down after yesterday’s sharp spike back to $2,200. Cocoa topped $10,000 a ton – a totally dysfunctional market now.
Spanish inflation reaccelerated to 3.2 per cent in March, from 2.9 per cent in February on higher energy prices. Eurozone inflation is due up next week. The euro area's annual inflation rate was 2.6 per cent in February 2024, down from 2.8 per cent in January. A year earlier, the rate was 8.5 per cent. But underlying inflation remains sticky. Core inflation, stripping out volatile components of energy, food, alcohol and tobacco, was 3.1 per cent – above the 2.9 per cent expected and still well above the European Central Bank’s target. However, we know that central banks are willing to tolerate higher inflation.
The yen slumped to a 34-year low against the US dollar, prompting some soft intervention from the authorities. Finance minister Shun'ichi Suzuki said the government would take "decisive action" on unwanted currency volatility, but declined to comment on whether this meant actual intervention. After hitting its highest since 1990, USDJPY slackened a bit overnight on the comments but has not budged much and the market will need more.
Usually in these situations, the market will test how far Tokyo is prepared to let it go. Rate differentials are what matters – the Federal Reserve was expected to cut more, and the Bank of Japan was probably expected to a little more than they have offered up so far. The carry trade is not quite dead yet.
Sterling trades a little weaker this morning having rejected the move to the old horizontal support/resistance level around 1.2670 following Monday’s bounce off 1.2590.
The Trader is written by Neil Wilson, chief market analyst at Finalto
