Global markets tumble, yen surges on Thursday

European stocks and US futures tumbled on Thursday following volatile sessions in Asia and on Wall Street. Investors faced challenges navigating a turbulent week for markets.

The yen and US bonds saw gains as traders awaited US weekly jobless claims data, which has gained importance following weak employment figures that triggered Monday’s market turmoil.

The Stoxx 600 index in Europe dropped 1 per cent after a 1.5 per cent increase on Wednesday. Germany’s DAX index fell by 0.6 per cent and Britain’s FTSE 100 declined by 1.1 per cent.

US S&P 500 futures were down 0.4 per cent, following a 0.8 per cent drop the previous day after initially rising by 1.7 per cent in morning trading.

Erik Nelson, a macro strategist at Wells Fargo, noted that volatility shocks and position unwinding could lead to sudden reversals and uneasiness in the market.

He expressed skepticism about a quick return to stability. Japan’s Nikkei share index fluctuated from a 2.5 per cent loss to a 0.8 per cent gain before closing 0.7 per cent lower.

Poor US job data, a surge in the Japanese yen, and fears of an AI bubble have caused a sharp decline in stocks.

The S&P 500 dropped 3 per cent on Monday and is down 2.8 per cent for the week, but still up around 9 per cent for the year.

The yen rebounded on Thursday, causing investor unease after a 1.6 per cent drop on Wednesday. The dollar fell 0.6 per cent to 145.76 yen.

Since reaching a 38-year low in July, the yen has surged 11 per cent due to intervention from authorities, a surprise Bank of Japan (BOJ) rate hike, and a US jobs slowdown affecting the dollar.

This rally has led to a significant unwinding of carry trades, where investors borrow in Japan to buy higher-yielding assets, triggering a 12 per cent drop in Japanese stocks on Monday.

Deputy BOJ Governor Shinichi Uchida downplayed the possibility of another rate hike in the near term, but minutes released on Thursday showed a hawkish sentiment among the board.

The US dollar index was down 0.2 per cent at 102.93, after hitting an eight-month low of 102.69 on Monday. The euro and pound slightly increased.

The yield on the 10-year US Treasury note dropped by 6 basis points to 3.909 per cent after increasing on Wednesday due to a poor debt auction.

The upcoming release of US weekly jobless claims data is eagerly anticipated by investors, as it could provide further clues about the strength of the labour market and the potential path of monetary policy.

In the commodity market, crude oil prices were little changed after rising the previous day on news of a larger-than-expected drawdown in US crude inventories. Brent crude futures edged up 0.1 per cent to $78.42 a barrel.

Attrbution: Reuters