The yen has strengthened for a fourth straight day against the dollar, while stocks in the region have oscillated. The yen's rise is putting pressure on Japan's export-oriented economy, whereas benchmarks in Australia and Hong Kong are up. The moves in Asia followed a fourth consecutive day of gains for U.S. equities yesterday, closing at their highest level this month. It was reported that the Fed is wrestling with a decision over how aggressively to cut rates next week. The S&P 500 closed 0.7% higher, with consumer cyclicals and technology sectors performing best, while the Nasdaq rose 1%. Treasuries sold off during morning trading yesterday, with the yield on the two-year Treasury rising after economic data showed a slightly stronger-than-expected monthly increase in U.S. wholesale inflation. Yields reversed some of that move in the afternoon session, ending slightly higher at 3.65% in late trading. Pressure on Treasury yields and the general weakness in the dollar suggest many are betting on a half-point cut next week.
The European Central Bank cut interest rates by a quarter percentage point to 3.5% in response to the Eurozone’s falling inflation and signs that economic risks are subsiding. Some analysts believe the ECB is likely to cut rates again at both of its remaining meetings this year.
Elsewhere, the price of gold hit a record high of $2,567 an ounce, and WTI crude rose more than 2% after storm Francine disrupted production in the Gulf of Mexico.
In terms of data today, we have Eurozone industrial production at 10 a.m., followed by U.S. Michigan consumer sentiment at 3 p.m.
