The Japan Times - Dow hits record on rate cut hopes, Tokyo tanks as yen rebounds

Tokyo bucked the trend as the yen shot higher on possible central bank intervention.

Wall Street's main indices advanced despite a lacklustre start of the earnings season, with bank shares taking a hit despite beating forecasts.

Shares in Wells Fargo tanked around 7 percent as its retail banking activities flagged and its costs rose more than its revenue.

Shares in JPMorgan Chase, the biggest US bank by assets, fell by 2.6 percent before cutting losses after it reported higher costs for bad loans.

Citigroup shares fell as much as 3.6 percent.

"The question for investors now is whether this sell-off is part of the rotation out of the higher performing stocks towards value investing, or is there something within these results that are unsettling investors," noted Kathleen Brooks, research director at XTB brokerage.

She noted that both JPMorgan Chase and Citigroup shares are up by around one-fifth since the start of the year.

Meanwhile, data showed US wholesale prices picked up more than expected in June on the back of higher services costs, unwelcome news for monetary policymakers.

A smaller-than-expected US print on the June consumer price index Thursday ramped up bets on easing borrowing costs on the horizon in the world's biggest economy, with investors increasingly pricing in a rate cut in September.

Earlier this week US Federal Reserve Chairman Jerome Powell indicated that the central bank did not need to wait for inflation to fall to its 2.0 percent target to begin lowering interest rates.

"Despite US producer prices coming in hotter-than-expected, most European and US stock indices ended the week on a positive note as investors are convinced a September Fed rate cut is on the cards," said Axel Rudolph, senior market analyst at online trading platform IG.

The S&P 500 was also sitting just below its record high in late morning trading.

European stock markets extended gains on Friday, with Frankfurt and Paris rising more than one percent.

In Asia, Tokyo tanked 2.5 percent with focus firmly on central bank activity.

Speculation abounds that the Bank of Japan intervened in foreign exchange markets to boost the yen, which sent stocks lower as it drags on the country's manufacturing exports.

Analysts said the softer US inflation data on Thursday provided Japanese authorities the perfect opportunity to step into forex markets to provide support to the yen, which surged against the dollar.

"The pronounced move in the yen appears to be coming on the back of combined impact from US inflation and intervention by Japanese authorities," Charu Chanana at Saxo Markets told AFP.

"There seems to be a new playbook for Japanese interventions, coming in along with supportive fundamentals, making the strength in yen somewhat more durable."

While speculation swirled about official involvement, Japan's top currency diplomat Masato Kanda told reporters late Thursday that authorities were "not in a position to comment on whether they intervened in the market", according to public broadcaster NHK.

- Key figures around 1530 GMT -

New York - Dow: UP 0.9 percent at 40,090.86 points

New York - S&P 500: UP 0.9 percent at 5,636.19

New York - Nasdaq Composite: UP 1.1 percent at 18,488.09

London - FTSE 100: UP 0.4 percent at 8,252.91 (close)

Paris - CAC 40: UP 1.3 percent at 7,724.32 (close)

Frankfurt - DAX: UP 1.2 percent at 18,748.18 (close)

EURO STOXX 50: UP 1.3 percent at 5,043.02 (close)

Tokyo - Nikkei 225: DOWN 2.5 percent at 41,190.68 (close)

Hong Kong - Hang Seng Index: UP 2.6 percent at 18,293.38 (close)

Shanghai - Composite: FLAT at 2,971.30 (close)

Dollar/yen: DOWN at 157.88 yen from 158.86 yen on Thursday

Euro/dollar: UP at $1.0905 from $1.0870

Pound/dollar: UP at $1.2988 from $1.2912

Euro/pound: DOWN at 83.97 pence from 84.15 pence

Brent North Sea Crude: UP 0.6 percent at $85.87 per barrel

West Texas Intermediate: UP 0.7 percent at $82.23 per barrel

burs-rl/giv

T.Shimizu--JT