Yen Eyes Big Gains as Fed Easing Looms, Nikkei Falls

The yen is in focus this week, hovering near 140 to the dollar, as traders anticipate a potential 50-basis-point rate cut from the US Federal Reserve. The Nikkei fell 1.7% as Japanese stocks reacted cautiously to currency moves, while Australia's ASX 200 hit a record high. In Hong Kong, Midea surged 9.5% on its trading debut, with Chinese markets closed for a holiday.

Equities

The FTSE 100 rose by 0.1%, continuing its upward momentum for a third consecutive session. Shares in the automobile and parts sector led the gains, with TI Fluid Systems surging by 14.1% after rejecting a revised buyout offer from ABC Technologies. Playtech climbed 15.1% after the gambling technology company raised its 2024 core profit forecast. Phoenix Group saw a 5.3% decline after halting the sale of its SunLife business, making it the worst performer on the FTSE 100.

In the US, the S&P 500 edged up 0.13% in a cautious trading session, while the Nasdaq fell by 0.52%, driven by a dip in technology stocks. Apple dropped 2.78% after an analyst highlighted weaker-than-expected demand for its latest iPhone models, making it the largest drag on both the S&P 500 and Nasdaq Composite. Nvidia, which has been a strong performer this year, fell 1.95%, while Broadcom and Micron Technology declined by 2.19% and 4.43%, respectively, amid concerns over the broader tech sector.

Intel was a standout performer, rising 6.36% following reports that the company qualified for up to $3.5 billion in federal grants for producing semiconductors for the US Department of Defense. Meanwhile, Boeing dipped 0.78% after announcing it would freeze hiring and consider temporary furloughs as its workers' strike entered its fourth day.

The Dow Jones Industrial Average closed up by 0.55%, driven by gains in sectors like financials and energy, which rose 1.22% and 1.2%, respectively. In contrast, the technology sector weighed on overall market performance, with the S&P technology index dropping 0.95%.

Forex & Commodities

The US dollar traded near its lowest levels of the year ahead of a possible 50 basis point rate cut from the Federal Reserve. The dollar index held at 100.7, close to its 2024 low. The euro hovered around $1.1123, near its yearly high, while the yen briefly strengthened past 140 before easing back to 140.77. Sterling traded at $1.3203, benefiting from signs of economic resilience in the UK.

Gold prices reached an all-time high of $2,589.6 per ounce, buoyed by a weaker dollar and the prospect of a significant rate cut from the Fed. Goldman Sachs reiterated its bullish outlook on gold, expecting prices to hit $2,700 by early 2025, citing strong demand from central banks and the Federal Reserve's expected policy shift.

Oil prices also extended gains, with Brent crude rising to $73.11 a barrel and US crude climbing to $70.62. Concerns over US output following Hurricane Francine and expected declines in US crude inventories supported the market. Over 12% of crude production in the Gulf of Mexico remains offline, contributing to higher prices despite weak demand from China, where refinery output has fallen for five consecutive months.