Market Update: US dollar moves above ¥100 – 10.05.2013

Source: Henderson Global Investors

Wall Street finished lower yesterday (Dow Jones -0.2%; S&P 500 -0.4%) as US market momentum finally fizzled out. Investors appear to be growing wary of chasing equities given some record highs, and with earnings season nearly over are trying to see the next catalyst. Talk of when the US would begin to taper its asset purchase programme was an unhelpful backdrop as Philadelphia Federal Reserve (Fed) Bank President Charles Plosser, speaking on Bloomberg TV, said that he would like the US Fed to scale back the pace of its stimulus. US macroeconomic data was mixed; while initial jobless claims (for unemployment benefits) fell last week to the lowest level in nearly five and a half years, sales of US wholesale goods in March dropped at their fastest rate in four years, likely contributing to a rise in inventories.

Overnight, Tokyo’s stock market has broken a 5-year high, the dollar’s move above ¥100 boosting expectations for further yen weakening and improving Japanese corporate profits. In contrast, Seoul’s Kospi index fell 1.8% as a weaker yen may see South Korean exporters less competitive abroad compared to their Japanese rivals. This morning, Europe has opened higher (FTSE 100 +0.4%; FTSE Eurofirst 300 +0.5%) supported by results from BT and steelmaker ArcelorMittal. Today sees the start of a two-day G7 finance ministers meeting, trade data from the UK and Germany, and the monthly budget statement from the US. Fed Chairman Ben Bernanke is also due to speak at the Chicago Fed banking conference.