S&P 500 Retreats as Yen Nears 40-Year Lows

Summary

The S&P 500 drifted lower as weakness in major technology stocks weighed on Wall Street, with futures extending losses into Tuesday. The Japanese yen hovered near its weakest levels in four decades against the US dollar despite previous intervention efforts, raising the prospect of further action from Japanese authorities. South Korean equities suffered a sharp sell-off after officials described current currency levels as excessive, while Brent crude eased following a temporary US sanctions waiver on Iran and signs of reduced Middle East tensions.

Equities

The FTSE 100 closed 0.7% higher on Monday, helped by a strong performance from major bank stocks as investors assessed UK political developments and progress in US-Iran talks. The FTSE 250 ended flat, while sterling edged higher against the dollar after Prime Minister Keir Starmer resigned and an orderly transfer of power was set in motion.

NatWest, Barclays and Lloyds all jumped more than 3% on Monday, giving the blue-chip index a clear lift. Household goods and home-construction stocks also recovered from earlier weakness to close higher as gilt yields eased across the board.

EasyJet rose 2.8% on Monday after Castlelake disclosed a £4.74 billion takeover approach for the budget airline. easyJet has rejected three proposals from the US investment firm, but the public confirmation kept the shares in focus.

Babcock International fell 5.9% after the defence and engineering group reported a 19% drop in annual underlying operating profit. The update weighed on the shares despite the broader strength in London’s large-cap market.

In the US, the S&P 500 closed 0.37% lower on Monday and the Nasdaq fell 1.32%, dragged down by sharp losses across megacap technology stocks. The Dow Jones Industrial Average moved in the opposite direction, closing 0.29% higher as healthcare and industrial shares supported the index.

SpaceX slumped 16.4% on Monday, marking its largest single-day fall, after launching its first debt offering. The company said it had about $100.8 billion in cash and cash equivalents as of 19 June, while the shares remained above their IPO price of $135.

Alphabet fell 5% on Monday, adding heavy pressure to the Nasdaq and the S&P 500. Meta, Amazon and Microsoft also closed lower, with losses ranging from 2.3% to 4.7%, as investors questioned the scale of spending on AI infrastructure.

Apogee Therapeutics jumped 46.7% after AbbVie agreed to buy the biotech company for $10.9 billion in cash. AbbVie also rose 6.2%, giving healthcare stocks a lift during a mixed session on Wall Street.

Forex & Commodities

The US dollar remained firm early on Tuesday, holding close to a one-year high as financial markets adjusted to expectations that the Federal Reserve could raise interest rates later this year. The dollar index traded near 101.1, while yields on two-year US Treasury notes stayed close to their highest levels in more than a year. Futures markets have increased the probability of a Fed rate rise, and both Bank of America and Deutsche Bank have revised their forecasts to anticipate tighter monetary policy before year-end.

The euro was little changed at $1.142, remaining close to a three-month low after European Central Bank President Christine Lagarde sought to ease concerns about persistent inflation pressures. Sterling traded at $1.323, steady after the resignation of Prime Minister Keir Starmer and the announcement of an orderly transfer of power. The Japanese yen remained under pressure at ¥161.6 per US dollar, close to its weakest level since the 1980s, prompting renewed speculation that Japanese authorities could intervene in currency markets.

Gold prices moved lower early on Tuesday, with spot gold trading at $4,119 per ounce. The stronger dollar reduced demand from overseas buyers, while traders also reassessed the outlook for US interest rates. Silver, platinum and palladium also declined.

Oil prices extended losses after falling sharply late on Monday. Brent crude traded at $76.81 per barrel as investors focused on signs that oil shipments through the Strait of Hormuz were beginning to recover following recent US-Iran peace talks. The United States has granted Iran a 60-day sanctions waiver, while officials have reported a sustained reduction in hostilities in Lebanon.