Stocks Start To Retreat Amid Monetary and Currency Developments

It has been a very mixed morning for trading among equity markets around the world. Asia Pacific indices rendered a split decision with the Nikkei climbing 0.6% back up above 40,000, while the Hang Seng dropped 1.25%. In Europe today, the Dax is up 0.1% while the FTSE is down 0.2%. US index futures are down 0.2% to 0.7%, giving back most of yesterday’s US index gains of 0.2% to 0.8%.

Overnight central bank news was mixed. The Bank of Japan abandoned its negative interest rate policy and raised its benchmark rate for the first time since 2007 to 0.0%. Japan’s central bank also ended asset purchases and its yield curve control program a decisively hawkish shift. Meanwhile the Reserve Bank of Australia dropped its hawkish tone (stopped talking about rate hikes) and took a neutral stance with no plans for near term rate cuts either as they continue to monitor incoming data. Interestingly, both the Yen, down 0.9%, and the Aussie Dollar, down 0.7% both declined on the news. In comparison, the Euro is down 0.2%, the Loonie is down 0.5%, and Gold is down 0.4%. 

It has been a particularly rough morning for Cryptocurrencies with Bitcoin falling 5.6% and Ether dropping 5.9%. This may be related to investors increasingly realizing that central banks may not be as dovish as previously thought moving forward, shoring up the general value of paper currencies relative to alternative currencies. Currency markets may remain active this week with the Fed decision and member forecasts tomorrow followed by the Bank of England and Swiss National Bank on Thursday.

In corporate news, recent AI related market darling and new entrant to the S&P 500 Index Super Micro Computer is down 10.8% premarket after announcing a 2 million share issue. Meanwhile, Nvidia* announced a new generation of chips coming later this year called Blackwell designed for processing AI models, potentially extended its lead on competitors. Its shares, however, are down 2.8% in premarket trading suggesting traders may be taking some short-term profits against the news.

Canadian consumer prices came in better than expected (2.8% vs street 3.1%), while Core CPI continued to improve (2.1% vs street 2.4%). US housing starts (1.52M vs street 1.42M) beat expectations. Commodity trading is mixed today. Natural Gas is up 2.8%, US Crude Oil is holding steady above $82.50/bbl consolidating recent gains, Copper is down 1.3% and Platinum is down 2.1%. *Shares of NVDA are held in some portfolios managed by SIA Wealth Management.  

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