By Chuck Mikolajczak
NEW YORK (Reuters) – A gauge of global stocks rose on Friday for a sixth straight session as investors assessed the start of U.S. earnings season and the path of inflation, while the yen jumped to a seven-month high on speculation the Bank of Japan may alter its loose monetary policy.
On Wall Street, U.S. stocks showed modest gains, recovering from earlier declines in the wake of earnings reports from several large banks such as JPMorgan Chase, up 2.37%, Wells Fargo, which rose 1.97%, Bank of America up 2.25% and Citigroup, which climbed 1.64%.
Major U.S. indexes had pared initial losses as the bank stocks moved off their early lows, with the S&P 500 banks index up 1.33% after dropping as much as 2.93%.
Helping to alleviate the initial selling pressure was data showing U.S. consumers see inflation easing over the next 12 months, according to the University of Michigan Surveys of Consumers. That came on the heels of the consumer price index reading on Thursday which showed consumer prices fell slightly in December.
GRAPHIC: UMich inflation expectations (https://www.reuters.com/graphics/USA-STOCKS/zjpqjeybkvx/umichinflation.png)
“There were no disastrous (bank) reports,” said Art Hogan, chief market strategist at B. Riley Wealth in New York.
“Combine that with the fact the University of Michigan consumer sentiment is stronger than expected, that paints the picture of an economy that may be slowing, but certainly not crashing.”
The Dow Jones Industrial Average rose 46.72 points, or 0.14%, to 34,236.69, the S&P 500 gained 4.08 points, or 0.10%, to 3,987.25 and the Nasdaq Composite added 35.23 points, or 0.32%, to 11,036.34.
Quarterly earnings for S&P 500 companies are expected to decline 2.2% from the year-ago period, per Refinitiv data, compared with an expected decline of 1.6% at the start of the year.
The dollar index rose 0.01%, with the euro down 0.15% toat $1.083.
European shares advanced, with the STOXX 600 index closing at its highest level since late April, buoyed in part by better-than-expected UK economic data, while healthcare and bank stocks rose.
The pan-European STOXX 600 index rose 0.52% and MSCI’s gauge of stocks across the globe gained 0.46%. The MSCI index hit a one-month high of 637.18 and was on track for its longest daily streak of gains in slightly more than two years.
The Japanese yen strengthened 1.12% versus the greenback at 127.84 per dollar, while Sterling was last trading at $1.222, up 0.16% on the day after the UK GDP data.
The greenback weakened to its lowest level against the yen since late May on speculation the Bank of Japan may revise or possibly even abandon its yield curve control policy as early as next week, which also pushed 10-year government bond yields briefly above the central bank’s 0.5% ceiling.
The BOJ subsequently stepped in to announce two separate rounds of emergency buying to pull the yield back down.
A newspaper report flagging the possibility of more flexibility has increased expectations of a coming shift out of extemely loose policy that seeks to keep yields near zero. The BOJ said it will conduct additional outright bond purchases on Monday, a move that should keep yields in check.
The BOJ will likely raise its inflation forecasts next week and debate whether further steps are needed, sources familiar with the bank’s thinking told Reuters.
Benchmark U.S. 10-year notes were up 5.1 basis points at 3.498%, from 3.447% late on Thursday.
(Reporting by Chuck Mikolajczak in New York; Additional reporting by Shubham Batra, Ankika Biswas and Amruta Khandekar in Bengaluru; Editing by David Evans, Matthew Lewis and Cynthia Osterman)
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