Wall Street to benefit from tech boom, but yen falls on BOJ gloom

Wall Street was higher on Thursday. The dollar, which had been dragged down by gloomy Bank of Japan forecasts, also rose, as signs emerged that the so-called U.S. "exceptionalism" trades might not be dead at all.

May Day was a public holiday in many parts of Europe and around the world. Trading volumes were low, but there were some active moves.

John Hardy, a Saxo Bank analyst, said this was a direct response to recent questions regarding whether Donald Trump's radical change in the post-WW2 global order will end "U.S. exceptionalalism" on the markets. This is where U.S. assets have been brought up as bets that they will perform well.

Hardy stated that "the recent narrative is to sell the dollar" and that it was a consensus.

Wall Street made a sprint on Wednesday despite news of the first U.S. quarterly contraction in three years. The Nasdaq is expected to open almost 2% higher following strong Microsoft and Meta earnings that eased recent "Magnificent 7" anxiety.

The Nikkei, a tech-heavy Japanese stock, had followed up with a jump of more than 1% in Asia. However, with London's FTSE almost stationary in Europe and MSCI's 47 country world stock index still in the negative for now.

The situation was not expected to last for very long.

The Nasdaq opened 1.8% higher and the S&P500 1.2% higher according to U.S. Futures. Microsoft surged almost 9% after its bumper forecast for growth, while Meta, the owner of Facebook and Instagram, was up more than 6% following strong advertising revenue.

Gold, which had risen as investors sought cover in this year's financial crisis, has also fallen to its lowest levels in two weeks, as traders took advantage of some signs of hope in the global trade conflict to lock in profits.

The Bank of Japan's decision to cut its forecasts on Thursday and the subsequent 1% drop in the yen against the dollar added to this. Hardy added, "Gold has also dropped today." Hardy said, "So these things are all linked".

DATA WATCHING

The majority of Europe's bonds markets were closed on the holidays. The UK 10-year Gilt Yields, a proxy of borrowing costs, ticked down and the U.S. Treasuries yields were back at 4.15%. Analysts now price in four U.S. rate cuts for the rest of the year.

The U.S. ISM Manufacturing data is due to be released later. The trade war was expected to have a negative impact on the data.

JPMorgan analysts noted that the S&P 500 had the largest loss in the first 100 of Trump's second presidential term since Richard Nixon's presidency of 1973.

The dollar is experiencing its worst year ever in the past 35 years, following the Plaza Accord, when the U.S.A., West Germany Japan France and Britain agreed to jointly devalue the currency.

What about the next hundred days? Analysts at JPMorgan said that attention will be focused on landmark fiscal legislation in the United States and the budget reconciliation processes, which will put the spotlight on America's unsustainable fiscal trajectory.

Oil prices on the commodities market have stabilized at $61 per barrel, after plummeting on Wednesday due to the U.S. drop in GDP and indications that Saudi Arabia, which is the world's largest crude exporter, plans to increase production this year.

Hardy, from Saxo Bank, said: "It'll be interesting to watch what happens if the drumbeat of negative data continues."

Ukraine's bonds also rose, with a commodity-related slant. This was after the government of Ukraine signed a long awaited agreement to grant the U.S. priority access to its rare minerals.

Analysts see this as a sign of progress after the ugly Oval Office spat that took place between Trump and Ukrainian president Volodymyr Zelenskiy in February.

In an interview with Fox Business Network, U.S. Treasury Sec. Scott Bessent stated that the deal would show "Russian leaders there is no daylight" between the Ukrainian and American people.

(source: Reuters)