LONDON: Wall Street and European stock markets mostly rose on Wednesday ahead of key US inflation data later this week while the yen recovered slightly from a 34-year low against the dollar.

The yen dropped to 151.97 to the dollar in Asian trading hours after a top Bank of Japan official indicated that it would press ahead with a loose monetary policy after last week’s first interest rate hike since 2007.

The Japanese currency strengthened to 151.03 in the European session on speculation that officials could step in to support the yen, but then weakened.

The weaker yen helped spur a rally in Tokyo’s benchmark Nikkei stocks index as exporters benefited, making it Asia’s best performer.

“After hitting its highest since 1990, the yen slackened a bit overnight on the comments but has not budged much and the market will need more,” said analyst Neil Wilson at trading firm Finalto.

“Usually in these situations the market will test how far Tokyo is prepared to let it go.” Earlier in the day, BoJ board member Naoki Tamura said officials would not embark on a speedy programme of monetary tightening as they try to nurture an economic recovery while keeping a lid on inflation.

“The handling of monetary policy is extremely important from here on for slow but steady progress in normalisation to fold back the extraordinarily large-scale monetary easing,” he said, according to Bloomberg News.

Finance Minister Shunichi Suzuki told reporters the government was “monitoring market movements with a high sense of urgency” and “will take resolute action against excessive moves, without ruling out any options.”

Eyes on inflation

Elsewhere, Wall Street’s main indices were higher in midday trading with investors eyeing Friday’s release of the Federal Reserve’s preferred gauge of inflation — the personal consumption expenditures (PCE) index — and the looming corporate earnings season.

“Quarter-end and Friday’s inflation reading are likely to keep any bullishness in check, but the fundamentals point towards further gains in April and beyond,” said Chris Beauchamp, Chief Market Analyst at online trading platform IG.

Analysts expect the Fed to start cutting rates in June following hikes aimed at taming soaring consumer prices.

“Many investors are concerned that an uptick on Friday could upend dovish expectations,” said David Morrison, senior market analyst at Trade Nation.

The Frankfurt DAX rose 0.5pc to a new record high even as leading German economic institutes lowered the 2024 growth forecast for Europe’s top economy to 0.1pc.

Paris added 0.3pc to also close at a record high and London finished flat.

Hong Kong and Shanghai closed more than one percent lower.

Oil prices slid after data showed US crude oil stocks and gasoline unexpectedly rose last week, a signal of weak demand.

Published in Dawn, March 28th, 2024