US Stocks Surge After Microsoft Earnings – Nasdaq up 2.8%
US equity markets enjoyed a stellar session overnight as stronger-than-expected earnings from Microsoft fuelled another powerful rally in technology stocks. Microsoft surged more than 15% after delivering earnings that comfortably beat market expectations, helping drive the Nasdaq 2.78% higher to close at 25,122. The broader S&P 500 gained 1.66% to finish at 7,437, while the Dow Jones climbed 1.19% to end the session at 52,208.
Bond markets were relatively subdued, with US Treasury yields edging lower as investors continued to digest this week’s Federal Reserve meeting. The 2-year Treasury yield fell 2.7 basis points to 4.246%, while the 10-year yield eased 0.4 basis points to 4.673%.
The US dollar came under heavy selling pressure, with the US Dollar Index falling 0.87% to 100.01. Much of the weakness was attributed to significant intervention by the Bank of Japan ahead of today’s highly anticipated monetary policy announcement, creating heightened volatility across the currency markets and setting the stage for another active Asian trading session.
Commodity markets were mixed overnight. Oil prices drifted lower despite the ongoing conflict across the Middle East, as traders weighed the geopolitical risks against broader demand concerns. Brent crude fell 1.45% to US$89.42 per barrel, while WTI crude declined 1.03% to US$83.59. Gold moved in the opposite direction, benefiting from the weaker US dollar to rise 0.92% and close at US$4,102.39 an ounce.
Yen in Focus Again for Traders
Japan stepped into the currency market overnight, reportedly buying yen and selling U.S. dollars for the first time in three months. USDJPY had been trading just below 40-year highs (163.98) when the Japanese authorities caught the market napping, taking the pair down to a low of 157.96. However, it has already jumped significantly in the last few hours and is now trading back towards 160.50. The move comes just ahead of the Bank of Japan’s interest rate decision today, where policymakers are widely expected to leave rates unchanged at 1% while maintaining a tightening bias. With the yen’s weakness driving up the cost of imported energy amid ongoing tensions in the Middle East, Japanese authorities appear determined to prevent further currency depreciation. Markets will now be watching closely to see whether the intervention marks the beginning of a more sustained effort to support the currency or simply serves as a warning to speculative traders. Some traders are now questioning whether there could be a surprise hike from the Bank of Japan later today to support last night’s intervention.
Busy Trading Day to Close out the Week
Traders are preparing for what is expected to be a busy finish to the trading week. The Bank of Japan’s interest rate decision and subsequent press conference will dominate the Asian session following last night’s intervention in the currency market. Later today, in the London session, traders will focus on Eurozone CPI data (exp +2.9% y/y, Core +2.4% y/y) before the market’s attention shifts to the New York session and some key data updates, with the US Employment Cost Index (exp +0.8% q/q), Canadian GDP figures (exp +0.2% m/m), and the latest University of Michigan Consumer Sentiment (exp 53.9) and Inflation Expectations (last +4.2%) data all due for release. Alongside the economic calendar, developments across the Middle East are likely to remain a key driver of market sentiment throughout the day.
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