Speculation that the Bank of Japan could effectively start paying banks to borrow its cash caused the yen to tumble yesterday, while US stocks dropped on disappointing earnings reports from some top companies.
Shares of Google’s parent, Alphabet, dropped 5.9 per cent to $733.81, a day after it missed Wall Street targets for first-quarter profit and revenue, and shares of General Electric also were down following results.
A Bloomberg report that Japan’s central bank might go further with negative interest rates caused the US dollar to hit its highest level against the yen in nearly three weeks, rising more than 1.7 per cent to 111.42 yen.
If the BOJ were to apply its negative rate policy to bank loans, it would allow the central bank to cut its deposit rates deeper into negative territory without acting as a headwind for the nation’s banks, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc in Washington.
Nasdaq led losses in US stocks, falling more than one per cent. Microsoft was down seven per cent also after it reported results late Thursday.
The Dow Jones industrial average was down 59.72 points, or 0.33 per cent, to 17,922.8, the S&P 500 had lost 8.58 points, or 0.41 per cent, to 2,082.9 and the Nasdaq Composite had dropped 68.78 points, or 1.39 per cent, to 4,877.10.
The MSCI world stock index was down 0.5 per cent, while European shares were down 0.5 per cent, weighed down by carmakers.
Daimler said it was investigating its US emissions and PSA Peugeot Citroen said it had been raided by French anti-fraud investigators over its emissions.
The Federal Reserve also meets next week. Healthy markets and reassuring data over the past month have left many investors wondering whether they might have been too quick in pricing out an increase in US rates this year.
US Treasury yields held near three-week highs as investors focused on the Federal Reserve meeting.
Yields have fallen since the beginning of the year on concerns about weakening US economic growth and on rising volatility in the oil and stock markets, which has led investors to lower estimates that further rate hikes are near.
Benchmark 10-year notes were last down 2/32 in price to yield 1.88 per cent, up from 1.87 per cent on Thursday.
In the energy market, oil prices jumped on the day and were poised for a third week of gains as market sentiment turned more upbeat amid signs a persisting global supply glut may be easing.
Brent crude futures jumped 2.1 per cent to $45.45 per barrel, while US crude was up two per cent at $44.07.