By Chris Prentice and Ankur Banerjee
NEW YORK/LONDON (Reuters) – U.S. and European shares finished mixed on Wednesday ahead of higher corporate earnings this week, and the yen was stuck at a 34-year low, leaving traders wary of intervention from Japan.
An auction of a record $70 billion of five-year U.S. Treasury notes sent bond yields soaring on Wednesday, putting pressure on stocks. [US/]
The MSCI index for shares around the world rose 1.31 points, or 0.17%, to 759.46.
On Wall Street, the stock market closed slightly higher after choppy trading.
The broad European index closed 0.5% lower as financial stocks pulled the index down from a more than week-long peak. ()
The S&P 500 gained 1.08 points, or 0.02%, to 5,071.63 and the S&P 500 gained 16.11 points, or 0.10%, to 15,712.75. It fell 42.77 points, or 0.11%, to 38,460.92.
“This week we return to market fundamentals and earnings data, at least temporarily sidestepping the geopolitics that have affected markets over the past two weeks,” said Samy Chaar, chief economist at Lombard Odier.
continued its decline, down 0.26% to $2,315.82 per ounce. The US settled 0.2% lower at $2,338.4.
DATA DIVERGENCE
Purchasing Managers Index surveys showed on Tuesday that overall business activity in the euro zone and Britain grew at the fastest pace in almost a year, while business activity in the US cooled.
That difference helped the euro rise above $1.07 in Asian trading, the highest level in more than a week.
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“For once, the data divergence between the US and the eurozone has benefited the euro/dollar,” Francesco Pesole, currency strategist at ING, said in a note.
“While hard data – especially inflation and employment – have been the real drag on the pair so far, caution is advised when it comes to rallies driven by activity surveys such as PMIs.”
March data on US gross domestic product and personal consumption expenditure, due later this week, will be crucial for the dollar and for investors’ efforts to gauge the path of US interest rates.
Traders expect the Federal Reserve to start easing rates in September and end the year with a 42 basis point rate cut, down from previous bets of 150 basis points.
“One thing is certain: the Fed is not raising rates. I believe they want to tighten financial conditions by communicating that even more distance is needed for cuts, but they can make those cuts at whatever speed they need to,” said Fed Director Jamie Cox. partner for Harris Financial Group in Richmond, Virginia.
INTERVENTION ZONE
The drastic shift in interest rate expectations has pushed government bond yields and the dollar higher in recent weeks, with the pressure felt mainly in Asia.
In the latest illustration, Indonesia’s central bank made a surprise interest rate hike on Wednesday, stepping up efforts to support the rupiah currency.
The Japanese yen weakened 0.09% against the dollar at 154.95 per dollar, hitting its lowest since 1990, ahead of the Bank of Japan’s two-day policy meeting that ends Friday. [FRX/]
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A senior Japanese ruling party official told Reuters they were not yet actively discussing what yen levels would be considered worthy of market intervention.
The benchmark 10-year Treasury note rose five basis points to 4.6459%.
In commodities, futures prices fell 40 cents, or 0.45%, to settle at $88.02 a barrel, while U.S. West Texas Intermediate crude futures fell 55 cents, or 0.66% to $82.81.
