Yen Plunges as BOJ Maintains Loose Monetary Policy

The yen fell to its lowest level in a month after Japan’s Prime Minister and central bank officials signalled no further rate hikes, boosting the Nikkei by 2.3%. European services PMIs are expected to reinforce expectations of ECB rate cuts in October and December, especially with Germany’s composite PMIs continuing to show contraction. Meanwhile, Asian markets had a mixed day, with Hong Kong stocks dropping sharply by 3.5%, driven by tech and property sectors.

Equities

The FTSE 100 rose by 0.2% on Wednesday, driven by gains in energy stocks as oil prices increased due to concerns over the potential impact of Middle East tensions on crude output. BP and Shell benefited from this rise, as their share prices climbed alongside the 1.6% increase in the oil and gas sector, closing at their highest levels in more than a week. Mining companies, particularly industrial metal miners, also saw gains with shares rising 1.2% thanks to higher copper prices, which were supported by China's recent economic stimulus measures.

On the downside, the automobiles and parts sector dropped 2.8%, with Aston Martin shares falling over 7% for the third consecutive session. JD Sports Fashion dropped 6.1%, driven by concerns after it failed to update its annual forecast despite strong first-half results.

In the US, the S&P 500 ended the day nearly flat, up just 0.01%, as technology stocks helped offset concerns over Middle East tensions and upcoming US jobs data. Nvidia was a standout performer, gaining 1.6%, which lifted the broader technology sector. However, Tesla’s shares fell 3.5% after reporting vehicle deliveries for the third quarter that came in below expectations. Nike shares plunged 6.8% after the company withdrew its annual revenue forecast, a blow to investor confidence just as it prepares for a change in leadership.

The Dow Jones Industrial Average rose by 0.09%, and the Nasdaq Composite edged up 0.08%. US markets are closely monitoring labour data this week, with private payrolls showing stronger-than-expected growth in September. Investors are awaiting non-farm payroll data due on Friday, which is expected to provide further insights into the health of the US labour market. Additionally, health insurer Humana saw its stock drop 11.8% after it warned of a potential decrease in enrolment for its Medicare Advantage plans in 2025.

In the UK, Prudential led the FTSE 100 with a more than 4% rise, while the insurance and banking sectors also posted gains.

Forex & Commodities

The US dollar index fell 4.8% in the third quarter, its worst performance in nearly two years, as the Federal Reserve cut interest rates by 50 basis points. Traders are watching for further declines, but the strength of the US economy and uncertainty surrounding the upcoming US presidential election may limit the dollar’s weakening. The Japanese yen, up 13% from its 2024 lows, has benefited from diverging monetary policies between Japan and the US Meanwhile, the Brazilian real and Norwegian krone have seen support from central banks maintaining higher rates.

Gold traded down 0.1% at $2,653.95 per ounce, hovering near its all-time high of $2,685. Investors are cautious ahead of key US economic data releases, including jobless claims and non-farm payrolls, which could influence the size of future Fed rate cuts. Gold remains supported by political uncertainty, with Middle East tensions adding to its appeal as a safe-haven asset.

Oil prices edged higher amid fears of supply disruptions from the escalating conflict in the Middle East. Brent crude rose 34 cents to settle at $73.90 per barrel, while West Texas Intermediate gained 27 cents to $70.10. Concerns over potential attacks on Iranian oil infrastructure by Israel are driving up prices, despite a rise in US crude inventories. US stockpiles grew by 3.9 million barrels, exceeding analyst expectations, while gasoline stocks also increased.