Stock markets rally and yen slides as Japan calms rate rise fears – business live | Business

Risk appetite has improved a little further today, thanks largely to the lack of any “major bearish news”, reports Fawad Razaqzada, market analyst at City Index and FOREX.com

With the economic calendar also being light, investors are making a more sober assessment of the events over the past week or so and are realising that there may have been a bit of an overreaction to the Bank of Japan’s larger than expected policy tightening last week that triggered all the volatility as investors were forced to unwind carrying trades.

That’s not to say we are completely out of the woods just yet. But there’s at least some stabilisation in the markets, which should allow some markets to re-align with the fundamentals.

Walt Disney has beaten Wall Street expectations in its latest financial results, despite a decline in earnings from its theme parks.

Disney reported a rise in revenues in the last quarter to $23.2bn, up from $22.3bn a year earlier.

This helped the company return to profit, with pre-tax income of $3.1bn, up from a $100m loss in Q2 2023.

Operating profits at its Entertainment unit more than doubled. That was partly due to the success of animated Pixar film “Inside Out 2”, which Disney says grossed more than $1.5bn globally, making it the most successful animated film ever.

But incomes from Disney’s Experiences arm, including theme parks, fell 3%.

Shares in Disney are 0.3% higher in pre-market trading.

Garry White, chief investment commentator at Charles Stanley, says:

“Walt Disney’s third-quarter results beat market expectations and management raised earnings guidance for the full-year. Its combined streaming service was profitable – and this profitability is expected to improve in the current quarter following price rises. Disney’s studio business performed well, with Inside out 2 and Kingdom of the Planet of the Apes both being high grossing films.

These are not ‘Mickey Mouse’ numbers, but markets are currently jittery and are focusing on the negative. Although the statement was upbeat, news from the Magic Kingdom was not so magical. A slowdown at its iconic theme parks following a surge following the Covid-19 pandemic likely to continue for the next few quarters, with income expected to decline year on year in the fourth quarter.

Time for a quick catch-up on the markets.

Shares have rallied on Asia-Pacific bourses, and across Europe, after a senior Bank of Japan policymaker tried to calm fears of further interest rates rises.

Japan’s Nikkei continued its recovery from its slump on Monday, gaining 1.2%, while Hong Kong’s Hang Seng index gained almost 1.4% and South Korea’s Kospi rose 2.15%.

In Europe, the UK’s FTSE 100 index is now up 90 points, or 1.13%, adding to earlier gains as traders anticipate a rally on Wall Street.

Germany’s DAX is 1.25% higher and France’s CAC has jumped by 1.6%.

Shares picked up after Bank of Japan’s deputy governor Shinichi Uchida indicated the BoJ would not hike interest rates when markets are unstable.

Uchida told businss leaders tht the volatility in domestic and overseas financial markets means “it is necessary to maintain current levels of monetary easing for the time being”.

David Morrison, senior market analyst at fintech and financial services provider Trade Nation says Uchida’s comments dampened fears that the BOJ would rush to raise rates further, after last week’s bigger-than-expected hike which preceded the recent stock market rout.

Morrison adds:

The speech has helped to soften the yen and give back some of last month’s outsized gains. That should take some pressure off those still exposed to the yen carry-trade, of which there are still significant numbers.

The US Dollar Index is firmer this morning, thanks mainly to the weaker yen, and also a pick-up in US bond yields. European stock indices were all stronger in early trade. Tensions have eased to some extent, and bargain hunters are out there looking for beaten down equities. But as with every earth-moving event, it’s sensible to prepare for aftershocks.

Technical analysts reckon the slump in Japanese stocks is over, for now at least.

They’ve spotted that Tuesday’s trading in Toyko formed a pattern called a “harami” – where the daily highs and lows were within the previous day’s levels. That indicates the bottom of the selloff has been reached.

On a daily trading chart, a bullish harami forms a candlestick whose body is located within the range of the previous day’s stick (showing how high and low the market traded each day).

Bloomberg says the harami suggests investor sentiment has shifted from one that’s dominated by pessimism to one that’s a tug-of-war between bears and bulls, adding:

When a bullish harami sign appeared on March 16, 2011 following the plunge after the tsunami and Fukushima nuclear meltdown, the Nikkei climbed 10% over the next month and a half.

Major advertising group WPP has agreed to sell its majority stake in strategic financial PR company FGS Global for £604m.

The deal will see WPP offload its 50% stake to current minority shareholder KKR, the US-based private equity firm, which will now own 80% of the company when the deal is completed.

Mark Read, chief executive of WPP, said the sale represented an excellent outcome for WPP after building it to become a world-leading communications company.

He added:

“This also provides WPP with greater financial and management flexibility as we continue to grow our core business including Burson and Ogilvy Public Relations which give our clients access to world-class public relations services.”

WPP’s share price has dropped by 1.6% today off the back of the news.

FGS was formed through a merger between London-based Finsbury, Frankfurt-based Hering Schuppener and Washington DC-based Glover Park Group. It now has nearly 30 offices and 1,600 clients around the world.

The agreement of the deal comes after the Financial Times reported in June that WPP had rejected a previous bid by KKR to buy FGS, with the offer being dismissed for being too low.

The Red Sea crisis is leading to “continued pressure on global supply chains”, shipping giant Maersk told investors today.

Maersk has grown its EBIT profit margin to 7.5% in the second quarter of this year, up from 1.4% in the first quarter.

Vincent Clerc, CEO of Maersk, says:

“Market demand has been strong, and as we have all seen, the situation in the Red Sea remains entrenched, which leads to continued pressure on global supply chains.

These conditions are now expected to continue for the remainder of the year.”

Last week, Maersk upgraded its financial guidance for this year – citing the prolonging of the crisis in the Red Sea and a continued robust market demand.

That crisis has forced container ships to be rerouted around southern Africa to avoid the Suez canal, forcing up shipping rates.

Maersk also reported today that the global economy maintained solid growth momentum in Q2, with mild recoveries in Western Europe and emerging markets, and strong growth in the US.

It added:

US goods demand grew 2% y/y in Q2, an acceleration from Q1. A healthy, albeit cooling labour market, and wage gains are expected to continue to support US consumers. Declining consumer confidence and savings, however, are clouds at the horizon.