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Sydney - The dollar sank and Treasuries climbed after the Federal Reserve signaled that inflation remains persistently below its target even as the economy picks up steam. Asian stocks jumped on optimism about corporate earnings, while European equities fluctuated.
The Bloomberg Dollar Spot Index touched the lowest in more than a year, while the 10-year Treasury yield extended losses after the Fed held rates steady and indicated it would start unwinding its balance sheet “relatively soon.”
The MSCI Asia Pacific Index reached the highest since December 2007 after earnings from Samsung Electronics and Nintendo beat analysts’ estimates, while the Stoxx Europe 600 Index swung between gains and losses amid results from a load of heavyweight companies.
The Fed said inflation remains below the central bank’s 2% target even as near-term risks to the economic outlook appear balanced, signaling it intends to kick off the long-awaited reduction in its $4.5trn balance sheet in September and fueling speculation the central bank won’t rush to raise rates.
With the central bank’s announcement out of the way, investors can return to a corporate earnings season that’s seen more than 80% of S&P 500 companies deliver higher than-expected profit. Thursday is one of the busiest for Europe, with companies worth more than $3trn reporting their accounts.
Deutsche Bank, Europe’s largest investment bank, disappointed after reporting a 10% decline in second-quarter revenue, while Nestlé SA warned that sales growth this year will be the weakest in at least two decades.
The outlook was better in Asia, as Samsung Electronics earnings beat analysts’ estimates on the success of its new Galaxy S8 smartphones and surging prices of semiconductors, while Nintendo surprised investors with a big jump in quarterly profit.
Here are the main moves in markets:
Currencies
• The Bloomberg Dollar Spot Index fell 0.1% as of 09:12, after falling 0.6% on Wednesday.
• The yen traded at ¥111.24/$, down 0.1% after erasing an earlier gain.
• The South Korean won jumped 0.8%.
• The euro fell 0.1% to $1.1723 after a 0.8% advance on Wednesday sent the currency to a 30-month high.
• The British pound rose 0.1% after climbing 0.7 percent in the previous session.
• The Aussie extended gains above 80 US cents, rising 0.4% to the highest since May 2015 after jumping 0.9% Wednesday.
• It slid below 79c during local trading on Wednesday following weaker-than-expected Australian inflation data and a speech by the nation’s central bank governor.
Stocks
• The Stoxx Europe 600 was flat.
• Nestlé slumped 1.8% and Deutsche Bank lost 2.9%.
• AstraZeneca tumbled 15% after the drugmaker suffered a blow to its next-generation cancer therapy.
• Japan’s Topix index rose 0.4%, while Australia’s S&P/ASX 200 Index added 0.2%.
• South Korea’s Kospi index climbed 0.4%.
• In Hong Kong, the Hang Seng Index added 0.8%, while the Shanghai Composite Index increased 0.1%.
• The Dow Jones Industrial Average rose above 21 700 for the first time on Wednesday.
• Futures on the Nasdaq 100 Index climbed 0.6%.
• Facebook rose 3.4% in after-hours US trading after the company reported faster-than-expected sales growth.
Bonds
• The yield on 10-year Treasuries was at 2.28%, down less than one basis point after declining five basis points in the wake of the Fed statement from the previous session.
• French, German and UK 10-year yields lost four basis points.
• Australian government notes with a similar maturity saw yields fall four basis points to 2.69%, erasing Thursday’s gain of four basis points.
Commodities
• Gold rose 0.1% to $1 262.19 an ounce after climbing 0.8% in the prior session.
• West Texas Intermediate crude rose 0.3% to $48.91 a barrel, heading for a fourth day of gains.
• The Bloomberg Commodity Index advanced 0.4%, after climbing 0.7% on Wednesday.
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