Latest News

Dollar and stocks are in focus as US-Japan talks take center stage

Dollar and stocks are in focus as US-Japan talks take center stage

The dollar rose slightly on Thursday as traders took stock in the trade negotiations between Japan and the U.S., despite the uncertainty surrounding tariffs introduced by President Donald Trump.

Gold prices reached new record highs on the back of safe-haven flows. Investors also digested comments made by Federal Reserve chair Jerome Powell who warned about the risks of slowing down growth and increasing prices due to tariffs.

After a bruising trading session on Wednesday, the spotlight remained on technology stocks in light of the warnings issued by bellwethers Nvidia & ASML and ahead of TSMC's earnings.

Japan's Nikkei index rose by 0.7%, while the yen fell as Japan began talks with the United States. Trump, who joined the talks unexpectedly, announced "big progress" during the talks with Ryosei Acazawa, the lead Japanese negotiator.

Charu Chanana is the chief investment strategist of Saxo. He said that markets are detecting new signs of optimism in trade negotiations, as U.S.-Japan talks and China's willingness to engage in discussions have revived risk appetite. This is especially true in beaten down, trade sensitive markets.

Even a discussion about a conversation can boost the markets when investors are able to move from fear to optimism.

Stock markets in Asia were mixed after the U.S. closed sharply lower. South Korea's benchmark stock index increased 0.7% while Taiwan stocks declined 0.5%. European futures indicated a subdued opening.

Powell also said that the Fed will wait to see more data about the direction of the economy before it makes any interest rate changes.

Tom Graff is the chief investment officer of Facet. "Powell's in a tough spot," he said. "The Fed cannot act proactively to stem potential economic weakness because tariffs will likely also cause inflation."

The health of the semiconductor industry will be gauged by the earnings forecast from Taiwan Semiconductor Manufacturing Co., the world's biggest contract chipmaker.

The stock market took a beating on Wednesday, after Dutch giant ASML said that tariffs would increase uncertainty about its outlooks for 2025 and 26.

AI pioneer Nvidia warned of a $5.5billion hit after Washington restricted the export of its AI processor designed for China.

"The chipmakers' demand could be affected if there is a recession, for whatever reason, said Chris Zaccarelli. Chief investment officer at Northlight Asset Management.

But there is the possibility that there could be a decrease in demand if there were tariff barriers, or if short-term costs are imposed.

The blue-chip index of Chinese stocks was little changed on Thursday. Hong Kong's Hang Seng rose 1.6% led by a recovery in tech shares.

TRADE TALKS

Investors have focused on the fast-changing trade policies of Trump, as they wait to see whether new agreements will be reached between the U.S.

Investors dumped U.S. Treasuries and other assets last week because of uncertainty about the implementation of trade levies.

The Treasury market has been fairly stable this week. The benchmark U.S. 10 year Treasury yield increased by 3 basis points to 4.311%.

The euro fell 0.3% to $1.1367, but it was still close to its three-year high. This was ahead of the European Central Bank's policy announcement where rate cuts are widely expected.

The dollar index (which measures the U.S. Currency against six units) was slightly higher for the day, at 99.562.

The yen reached a seven-month peak earlier in the session, before falling to a 0.55% lower rate of 142.64 dollars per yen after Japan's Economy Minister Ryosei Acazawa stated that foreign exchange was not discussed during the Washington trade talks.

Gold prices have been the focus of commodities as they reached yet another record-high, reaching as high as 3,357.40 an ounce in the morning session, due to the safe-haven flow. Gold prices were last unchanged at $3,341.91 an ounce.

The prospect of tighter supplies has helped oil prices extend their gains. Brent crude futures increased 0.93% to $66.46 per barrel. U.S. West Texas Intermediate crude rose more than 1% to $63.2 per barrel.

(source: Reuters)