US Stocks Rally into the Weekend – Dow up 2.5%
US equity markets finished the week with a powerful rally on Friday as investor confidence rebounded. The Dow Jones Industrial Average surged 2.47% to close at a record 50,115 — the first time the index has finished above the 50,000 level. The broader market followed suit, with the S&P 500 rising 1.97% to 6,935, while the Nasdaq gained 2.18% to close at 23,031. In fixed income markets, US Treasury yields moved higher off three-month lows as traders positioned ahead of delayed US labour market data due later this week. The 2-year yield rose 4.7 basis points to 3.498%, while the 10-year yield added 2.6 basis points to 4.206%. Despite the lift in yields, the US dollar softened modestly, with the Dollar Index slipping 0.20% to 97.63. Commodities once again experienced a volatile day. Oil prices pushed higher as geopolitical concerns surrounding the US-Iran situation intensified, with Brent rising 0.74% to $68.05 and WTI advancing 0.41% to $63.55. Precious metals were particularly lively, with gold surging 3.87% to close at $4,964.36 by the New York close.
Yen Back in Focus on Japanese Election Updates
The FX market will be focussing heavily on the yen market at the start of this trading week, with Prime Minister Sanae Takaichi looking set to win a landslide victory in government elections that will allow her to press forward with plans for strong tax cuts and military spending — which should lead to a softer currency. We have already seen some whippy moves in the market in the first few hours of trading. The yen weakened on the open, with USDJPY rallying 70 pips from the Friday close, yet it capped out to strong selling interest around the 157.70 level before dropping swiftly back to 157.00, with some traders querying whether there was official action at that level. It does feel like the market wants to test moves higher both in USDJPY and on the crosses, and we know that the Bank of Japan does not want to see excessive weakness in the currency, so many yen traders are preparing for some long sessions ahead with yet more volatility in the currency.
Busy Day Ahead Despite Quiet Calendar
The macroeconomic calendar is quiet to begin the week, although traders are not expecting subdued conditions. Last week’s volatility across equities, commodities, and currencies is likely to spill over into the coming sessions, particularly with key US employment and inflation data still to come. Attention now shifts to Asia, where traders anticipate sharp moves on the open — especially in the Japanese yen — as election results are fully digested. Early indications point to a decisive victory for Prime Minister Sanae Takaichi, and initial yen weakness has already emerged. However, with currency levels approaching recent areas associated with official intervention, market participants remain alert to the risk of heightened volatility. There is little on the calendar in both the London and New York sessions today, and although we do hear from some key central bankers later in the day, including Buba President Joachim Nagel and the Fed’s Raphael Bostic, most market participants expect geopolitical updates to dominate sentiment.
