In Tokyo, on Thursday, July 27, 2023, people were seen walking across an intersection near monitors displaying Japan’s Nikkei 225 index at a securities firm. The Bank of Japan’s adjustment to its bond purchase policy while keeping the negative benchmark interest rate unchanged resulted in mixed performance in Asian shares on Friday. While Tokyo and Sydney experienced declines, Hong Kong and Shanghai saw advances. Furthermore, U.S. futures were lower, and oil prices fell.
The Bank of Japan decided to maintain its benchmark interest rate at minus 0.1 percent but made adjustments to its bond purchases to increase flexibility. Under its “yield curve control program,” it will now offer to purchase 10-year Japanese government bonds at 1 percent each business day, compared to the previous upper limit of 0.5 percent. The aim remains to keep long-term interest rates near zero percent. The Bank of Japan attributed this decision to the high uncertainties in the economy and prices, which required a more nimble approach.
Before the announcement, Japan’s markets experienced some instability. As a result, Tokyo’s Nikkei 225 fell by 2.2 percent to 32,144.47, and the dollar weakened against the Japanese yen, slipping to 138.58 yen from 139.49 yen. In Australia, the S&P/ASX 200 saw a decline of 0.4 percent to 6,870.58, while in Hong Kong, the Hang Seng index increased by 0.9 percent to 19,814.76. The Kospi in Seoul also experienced a decline of 0.4 percent to 2,593.98. It’s worth noting that the markets in India and Thailand were closed for holidays.
In Europe, stocks climbed on Thursday following the European Central Bank’s decision to raise interest rates, while keeping the possibility of further increases open. The French CAC 40 experienced a surge of 2.1 percent, and Germany’s DAX returned 1.7 percent. However, Wall Street’s rally fizzled out as the S&P 500 sank by 0.6 percent to 4,537.41 after reaching its highest level in almost 16 months earlier in the day. The Dow Jones Industrial Average also went from an early gain to a loss, dropping 0.7 percent to 35,282.72. Similarly, the Nasdaq composite fell 0.5 percent and ended at 14,050.11.
Honeywell International’s weaker-than-expected revenue and forecast for earnings in the current quarter impacted the market, with the company’s stock dropping by 5.7 percent. This halt in Wall Street’s run interrupted a 13-day climb for the Dow, which was on the verge of tying a win-streak record set in 1897. The recent surge in stocks was fueled by optimism that the Federal Reserve could successfully combat high inflation by raising interest rates without causing a recession. However, critics argue that this surge has been too rapid and that the consensus on a “soft landing” for the economy is far from certain.
Despite mostly encouraging reports about the economy on Thursday, the pressure on inflation could persist. Strong data on the job market, in particular, suggests that U.S. households will continue spending, encouraging companies to raise prices. This, in turn, could lead the Federal Reserve to keep interest rates higher than expected, thus keeping the threat of a recession alive. One report indicated that economic growth accelerated in the spring, surpassing economists’ forecasts. Additionally, it suggested that inflation in the months of April through June was not as high as expected. Another report mentioned a decrease in the number of workers applying for jobless benefits, indicating a solid job market. Yet another report indicated that orders for long-lasting manufactured goods exceeded expectations.
On Friday, U.S. benchmark crude oil dropped by 35 cents to $79.73 a barrel, while Brent crude, the international pricing basis, declined by 49 cents to $83.30 per barrel. The euro also slipped slightly to $1.0963 from $1.0965.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
