Stocks dip as investors mull Trump-Xi deal, cautious BOJ dents yen

Adam

Summary:

Global stocks slipped as investors questioned the durability of Trump-Xi trade progress. The BOJ held rates, weakening the yen. Fed uncertainty and disappointing Meta and Microsoft earnings also weighed on sentiment.

Global shares dipped on Thursday as investors remained cautious after U.S. President Donald Trump said he had made a deal with Chinese President Xi Jinping, while the dollar rose against the yen after the Bank of Japan left interest rates unchanged.

After a near two-hour meeting with Xi, Trump said he had agreed to reduce tariffs on imports from China in exchange for Beijing resuming U.S. soybean purchases, keeping rare earths exports flowing and cracking down on the illicit trade of fentanyl.

Xi urged further cooperation in comments carried by Chinese state media after the meeting. China's Commerce Ministry later said it would pause some countermeasures for a year.

Equity markets fell on concerns the truce may prove fleeting. Previous trade negotiations have seen promising starts followed by setbacks.

INVESTOR THUMBS-DOWN TO META, MICROSOFT

Adding to the more downbeat tone in stocks, two of the biggest U.S. tech companies reported earnings that disappointed investors, leaving shares in Microsoft (MSFT.O) and Meta (META.O) down 3% and 7%, respectively, in the premarket.

In a heavy day for European earnings, the STOXX 600 (.STOXX) fell 0.3%.

"A good Trump/Xi meeting was in the price for a while now, over the past few days, the narrative on that was that it was going to be a positive outcome, therefore, we've simply got confirmation of that," Chris Scicluna, head of economic research at Daiwa Capital Markets, said.

The dollar edged lower against most major currencies, except the yen, after the Federal Reserve on Wednesday cut interest rates, as expected. Yet, Chair Jerome Powell signalled that another cut in December was not a certainty, which pushed up Treasury yields and, with them, the U.S. currency.

Members of the Federal Open Market Committee (FOMC) had gone into the meeting with far less visibility on the economy than usual, as the U.S. government shutdown, now almost a month old, has prevented the release of key data, including the monthly employment report.

"It's understandable why the FOMC are hesitant over whether or not a further rate cut in December, and maybe more in next year, are really merited, when we have this evident froth in stocks and a boom in AI which certainly has legs running into 2026," Scicluna said.

Traders have cut the chances of another quarter-point cut from the Fed this year to around 70%, from closer to 90% on Wednesday, according to the CME Group's FedWatch tool.

The yield on the U.S. 10-year Treasury bond was last around a three-week high of 4.0776%, up 1.96 basis points compared with a previous close of 4.058%.

DOLLAR RISES AGAINST YEN AFTER BOJ

The dollar index , a basket of six major currencies, was up 0.1% at 99.075, near two-week highs, largely due to gains versus the yen , which hit an eight-month low against the dollar and a record low against the euro .

The BOJ kept rates unchanged, as expected, and reiterated its intention to gradually raise borrowing costs if the state of the economy justifies that.

"The BOJ is tip-toeing towards a hike," Fred Neumann, chief Asia economist at HSBC in Hong Kong, said. "With October a missed opportunity to nudge rates higher, all eyes are now on December, when a rate hike appears likely."

The yen had rallied earlier after remarks by U.S. Treasury Secretary Scott Bessent calling for speedier rate hikes to avoid weakening the currency too much.

By mid-morning in Europe, losses mounted for the yen, leaving the dollar up 0.7% at 153.76 and the euro up as much as 0.87% at 178.7, the most since the launch of the single European currency in 1999.

The euro was up 0.2% against the dollar at $1.16215 ahead of a policy decision by the European Central Bank later in the day, at which it is expected to leave rates on hold for a third meeting in a row.

In corporate earnings, Meta (META.O) and Microsoft troubled investors with increased spending on AI, leaving shares under pressure, while rival and Google parent Alphabet (GOOGL.O) beat revenue expectations, sending its stock up 8%.

U.S. stock index futures , fell 0.1%.

Gold rose 2% back above $4,000 an ounce.

Source: reuters

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