© Reuters. FILE PHOTO: A man walks past an electric screen showing Japan’s Nikkei average share and recent moves, outside a bank in Tokyo, Japan, June 5, 2023. REUTERS/Issa Kato
Written by Naomi Rovnik and Stella Keogh
LONDON, SYDNEY (Reuters) – Global stocks fell on Friday after disappointing technology earnings sapped risk appetite, while the dollar rose against the yen after a report that the Bank of Japan is leaning toward maintaining its yield curve control policy next week.
Global stocks, which have risen more than 16% this year, fell 0.3%. Europe was flat and Germany’s technology sector slipped 0.3%.
After sharp falls after earnings in Tesla (NASDAQ:) and Netflix (NASDAQ::) earlier in the week and chip maker TSMC warning of lower 2023 sales, a sub-index of European technology stocks lost 0.9%.
The moves came after Wall Street’s tech-heavy Nasdaq fell 2% on Thursday, its biggest one-day loss since March. Investors cashed in on concerns about tech stock valuations, which have been fueled by exuberance about the potential of artificial intelligence that has helped the Nasdaq gain about 40% since the start of the year.
“The market has been overbought,” said Patrick Spencer, vice president of equities at Baird. “If you haven’t played this market, you’ve missed out.”
The special rebalancing of the trillions of dollars worth of debt due at the close of trading on Friday, Spencer said, will also lead to some “warped price action” in the big tech companies.
Spencer added that the index overhaul — designed to undercut the heavyweights of tech giants like Microsoft (NASDAQ:) and Apple (NASDAQ:) — could exacerbate moves in these stocks during the ongoing earnings season. But he also predicted that perpetually bullish tech investors would use continued price weakness as an “opportunity to reload.”
Futures trading indicated that the S&P and Nasdaq 100 would add about 0.2% in early trading in New York.
yen in the long term
The dollar is heading for its biggest one-day rally against the yen in a month after sources familiar with the Bank of Japan’s thinking said central bank officials are leaning toward maintaining a yield control policy at next week’s policy meeting.
said Guillaume Paillat, multi-asset manager at Aviva (LON:) Investors.
The dollar jumped 1.3 percent on the day to buy 141.8 yen, its biggest rise since late April. Just a week ago, it was trading below 138.
The benchmark 10-year Japanese government bond yield fell 5 basis points to 0.41%, the lowest since July 6, before speculation of a tough policy adjustment this month began to rise.
The US Federal Reserve and European Central Bank also meet next week, and both are expected to raise interest rates again after the most aggressive monetary tightening cycle in decades.
The Fed’s outlook will be watched closely as the US central bank balances above its inflation target in an economy that appears to be slowing in tandem, with the potential for implementing rate hikes yet to cause a deep recession.
In bond markets, Treasurys steadied after spending the previous session bracing for further Fed tightening in response to an unexpected drop in weekly jobless claims.
The two-year Treasury yield, which tracks interest rate expectations, was flat on the day at around 4.84% in European trade.
Ten-year Treasury yields were flat at 3.854%, after rising 11 basis points the previous day.
Elsewhere, oil prices have been higher. Futures rose 1% to $80.41 a barrel, and US West Texas Intermediate crude futures rose 1% to $76.40.
Gold prices settled at $1,970 an ounce.