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World shares wobble, yen slides after BOJ policy tweak

2023-11-01 00:22
By Herbert Lash and Tom Wilson NEW YORK/LONDON Global stocks wobbled on Tuesday following weak U.S. earnings a
World shares wobble, yen slides after BOJ policy tweak

By Herbert Lash and Tom Wilson

NEW YORK/LONDON Global stocks wobbled on Tuesday following weak U.S. earnings a day before the Federal Reserve is expected to again say rates will stay high for longer, while the yen slid after the Bank of Japan's step to end years of monetary stimulus left investors cold.

While shares in Europe gained as investors drew comfort from resilient regional results, Asian equities earlier lost ground on renewed fears over the prospects for the Chinese economy following weak manufacturing data.

On Wall Street, heavy-machinery maker Caterpillar fell 6.1% as dealer inventories rose and a large order backlog shrank, indicating demand is slowing. Pfizer's shares fell 1.7% after the drugmaker reported its first quarterly loss since 2019.

"Earnings forecasts for the fourth quarter are coming down," said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan. "A lot of that has to do with the guidance that's coming from S&P 500 companies, which has been more conservative."

Fourth-quarter earnings growth for S&P 500 companies as of Friday has fallen to 8.5% from 11.0% expected on Oct. 1, according to LSEG data.

Meanwhile, investors are waiting to see what the Fed says after a two-day policy meeting ends on Wednesday, which is unlikely to deter significantly from past statements.

"It's going to be the same dry higher for longer message that the markets continue to struggle with," Saglimbene said.

MSCI's U.S.-centric gauge of stocks across the globe slipped 0.07%, while the pan-European STOXX 600 index rose 0.59%.

The Dow Jones Industrial Average fell 0.1%, the S&P 500 gained 0.04% and the Nasdaq Composite dropped 0.2%.

The yen fell about 1.5% to a new one-year low of 151.32 after the BOJ eased its grip on long-term rates by further loosening its bond yield control policy (YCC) on what analysts viewed as a small and insufficient step.

The yen fell as traders focused on the BOJ's dovish pledge to "patiently" maintain accommodative policy, and forecast inflation to slow below 2% in 2025.

The yen also weakened further against the euro, with the single currency up 1.5% to a 15-year high of 160.64.

Longer-dated Treasury yields dipped as investors awaited the Fed statement and comments from Fed Chair Jerome Powell. Benchmark 10-year notes last week hit 16-year highs as investors contemplate higher yields for longer, and on concerns about increasing U.S. Treasury supply. The yield on 10-year Treasury notes fell 2.5 basis points to 4.852%. Euro zone yields fell as individual country inflation data pointed to a lower print for the currency bloc overall later in the day. Germany's benchmark 10-year yield fell 5.5 basis points to 2.77%, testing the previous day's two-week low.

Asian equities earlier slid as Chinese manufacturing activity returned to contraction, reviving worries over the world's second-largest economy. Recent indicators had showed a nascent recovery in China.

The dollar index, which measures the U.S. currency against six rivals, gained 0.48%. The euro looked set to reverse two straight months of losses with a 0.3% gain for October.

The single currency was last up 0.3% at $1.0662.

Oil prices were steady on Tuesday as a drop in euro zone inflation was balanced by higher OPEC output.

U.S. crude recently fell 0.06% to $82.26 per barrel and Brent was at $87.65, up 0.23% on the day.

(Reporting by Tom Wilson in London and Ankur Banerjee in Singapore; Editing by Lincoln Feast, Kim Coghill, Miral Fahmy, Jan Harvey and Emelia Sithole-Matarise)