Broadcom Falls as Yen Hits three-week high

Summary

Broadcom shares fell in extended trading despite forecasting strong AI chip sales for the next two years, while US equity futures pointed slightly higher early on Thursday. The yen strengthened to a three-week high after a sharp rise on Wednesday, amid expectations that the Bank of Japan could raise interest rates. European shares were also set for modest gains, while oil remained above $90 a barrel as US-Iran strikes continued.

Equities

The FTSE 100 fell 0.3% to 10,756.45 on Wednesday, while the FTSE 250 dropped 0.8% to its lowest level since 4 August. UK government bond yields climbed sharply during the session, with the 10-year gilt yield reaching 5.294%, its highest since August 2007, before easing to 5.236%.

Rate-sensitive UK shares came under pressure on Wednesday. Utilities fell 1.9%, homebuilders dropped 1.8% and retailers declined 1.9%, while the banking sector gained 0.5%. Standard Chartered rose 1.6%, making it one of the stronger performers among the major UK-listed banks.

Energy shares gained 0.3% on Wednesday as oil prices traded above $95 a barrel. Precious-metals miners Fresnillo and Endeavour Mining both rose 1.9% as gold prices strengthened, while Pearson fell 2.2% after Citigroup downgraded the education company to “neutral” from “buy”.

US stocks closed higher on Wednesday, recovering some of their recent losses. The Dow Jones Industrial Average rose 0.56% to 53,061.95, the S&P 500 gained 0.46% to 7,666.60 and the Nasdaq Composite climbed 0.45% to 26,217.83.

US Treasury yields eased after recently reaching multi-year highs. The benchmark 10-year Treasury yield slipped to 4.794% on Wednesday after reaching 4.818% earlier in the session, its highest level since November 2023.

Expectations for another Federal Reserve rate increase have strengthened ahead of the central bank’s 15–16 September meeting. Markets were pricing roughly a two-thirds chance of a 25-basis-point increase, compared with 37% a week earlier, while Wednesday’s ADP report showed US private-sector employment increased by 38,000 in August, below expectations for a 48,000 rise.

Forex & Commodities

The US dollar weakened early this morning, with the dollar index easing to 99.41 ahead of Friday’s US employment report. The euro rose to $1.160, while the British pound recovered from a three-week low to $1.350.

The Japanese yen strengthened sharply early this morning to 157.5 per US dollar, its strongest level in nearly a month. The move followed comments from Bank of Japan board member Hajime Takata that interest rate increases should be conducted more quickly to counter inflationary pressures. Markets are now almost fully pricing in a BOJ rate rise this month.

The Australian dollar held near a three-month high at $0.7168 early this morning, while the New Zealand dollar rose to $0.5865. The Canadian dollar strengthened to C$1.383 after the Bank of Canada kept rates unchanged on Wednesday but indicated it was prepared to tighten policy if needed to control inflation.

Spot gold rose early this morning to $4,422 an ounce, recovering after reaching a near one-month low during Wednesday’s session. Markets are pricing a 63% probability of a Federal Reserve rate increase this month.

US private payrolls increased moderately in August. A separate Federal Reserve survey released on Wednesday showed economic activity increased modestly, employment rose slightly and prices increased moderately in recent weeks.

Friday’s US nonfarm payrolls report is expected to show employment rising by 56,000 after a 23,000 decline in July, with unemployment remaining at 4.1%.

Oil prices edged lower early this morning, with Brent crude falling to $95.04 a barrel and US West Texas Intermediate declining to $90.63. Both benchmarks reached their highest levels since 24 July during Wednesday’s session before retreating as investors assessed whether the latest escalation between the US and Iran was easing.