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Stocks hold on to gains, yen on intervention watch

Worldwide shares steadied on Monday ahead of U.S. price data that investors are relying on to show a restored moderation in inflation, while markets were on alert for Japanese intervention as the dollar checked the 160-yen barrier.

Geopolitics also loomed big, with the very first U.S. presidential debate on Thursday and the first round of voting in the French election at the weekend.

The MSCI All-World index was flat on the day, having actually succumbed to the previous two sessions. In Europe, the STOXX 600 edged into favorable territory, while U.S. index futures were up 0.1-0.2%.

Shares in Boeing might face pressure after reported that U.S. prosecutors are advising criminal charges be brought versus the airplane maker.

Japan's Nikkei closed up 0.5%, with the continued decline in the yen putting pressure on the Bank of Japan to tighten up policy in spite of patchy domestic information.

Minutes of the central bank's last policy meeting out on Monday revealed there was much conversation about tapering its bond buying and raising rates.

Japan's leading currency official was out early to voice disapproval with the yen's latest drop which saw the dollar reach as high as 159.94.

The dollar was trading simply a shade softer at 159.74, eyeing the 160.245 peak from late April where Japan is thought to have began spending around $60 billion purchasing the yen.

Demand for carry trades - borrowing yen at low rates to purchase greater yielding currencies - has actually likewise seen both the Australian and New Zealand dollars reach 17-year peaks on the yen

Fresh cyclical highs for the dollar versus the yen. overnight, further intervention jawboning from Japan's FX supremo Kanda and continued pressure on the yuan underline the pain being felt in Asia and EM more broadly from the Fed's high for longer stance, and will most likely revive 'currency wars' chatter, Marc Ostwald, primary international financial expert at ADM Financier Services.

PARSING THE PCE

Even the euro was evaluating recent highs at 170.87 yen , in spite of being saddled with a round of soft manufacturing studies (PMI). The euro is heading for a drop of 1.2% in June, its biggest regular monthly decrease because January. But on Monday, it was trading up 0.2% on the day at $1.07123.

The decline in the euro location flash June PMI raises some concern that the nascent rebound is being cut short, experts at JPMorgan composed in a note.

The abruptness of the drop is significant against the background of the French election, which was discussed explicitly by firms as a reason for the drag.

France's far-right National Rally (RN) party and its allies were seen leading the first round of the nation's elections with 35.5% of the vote, according to a poll released on Sunday.

Production surveys from the United States, in contrast, revealed activity at a 26-month high in June, though price pressures subsided considerably.

The latter shift whetted appetites for the personal usage expenditures (PCE) price index due on Friday. Yearly growth in the Federal Reserve's favoured core index is expected to slow to 2.6% in May, the lowest in more than three years.

Note that low PCE deflator results are required to keep the y/y rate from increasing through the course of this year given the string of low prints in the second half of 2023, warned experts at NAB.

The Fed is well aware of this as the typical dot for end 2024 was 2.8% for PCE, the same from its existing level and indicating typical monthly results of 0.18%.

A low result would probably strengthen market bets on a Fed rate cut as early as September, which futures currently cost as a 65% prospect.

There are at least five Fed speakers on the docket this week, consisting of San Francisco Fed President Mary Daly and Fed Guvs Lisa Cook and Michelle Bowman.

In product markets, gold pared losses in line with the retreat in the dollar to trade up 0.5% at $2,330 an ounce, while oil rose, pushing Brent crude up 0.2% to $85.41 a barrel and U.S. crude likewise up 0.2% at $80.87.

(source: Reuters)