Global Stocks Rise on Big Tech Gains as Yen Hits 34-Year Low

On April 28, 2023, global stocks rose, led by gains in Big Tech shares on Wall Street. The MSCI global stock index climbed 0.9%, driven by optimism in the tech sector following strong results from Alphabet and Microsoft. In the US, the S&P 500 and Nasdaq had their biggest weekly gains since early November 2023.

Meanwhile, Japan's yen hit a 34-year low against the US dollar after the Bank of Japan (BOJ) maintained its loose monetary policy. The BOJ's decision came despite forecasting inflation around 2% for the next three years. The yen traded as low as ¥157.78 to the dollar after BOJ Governor Kazuo Ueda said the yen's weakness was having "no major impact" on Japanese inflationary pressures, fueling speculation that the government might intervene to support the currency.

The yen's rapid decline has raised concerns about potential BOJ intervention to stabilize the currency, as the USD/JPY pair nears all-time highs. The yen has lost almost 11% of its value against the dollar this year, making it the worst performer among G10 currencies. Japanese policymakers have warned that they will respond appropriately to excessive yen depreciation, and the possibility of intervention increases if the yen falls further.

In the US, the personal consumption expenditures (PCE) price index, a key inflation measure, rose 2.7% year-over-year in March, meeting expectations. The core PCE price index, which excludes volatile food and energy prices, held steady at 2.8% annually, surpassing analysts' estimates of 2.6%. The strong inflation data affirmed expectations that the Federal Reserve will likely delay cutting interest rates until later this year.

Why this matters: The global stock market rally, driven by Big Tech gains, and the yen's decline against the US dollar highlight the divergence in monetary policies between the US and Japan. The BOJ's decision to maintain its loose monetary policy, despite concerns over the yen's weakness, has significant implications for global currency markets and trade dynamics.

Traders now expect the Federal Reserve to cut interest rates by just 36 basis points this year, down from previous expectations. Investors are now focused on the upcoming Federal Open Market Committee meeting, where the Fed is expected to hold interest rates steady but maintain a hawkish stance. The upcoming Fed policy meeting and earnings reports from tech giants like Apple and Amazon will be closely watched by investors.

Key Takeaways

• Global stocks rose, led by gains in Big Tech shares on Wall Street.
• Japan's yen hit a 34-year low against the US dollar after BOJ maintained loose policy.
• US PCE inflation data met expectations, affirming Fed's likely delay in cutting rates.
• Divergence in US-Japan monetary policies has implications for global currency markets.
• Investors focus on upcoming Fed meeting and tech earnings reports for market cues.