By Jamie McGeever
ORLANDO, Florida, June 3 (Reuters) - Escalating tensions in the Middle East and a wave of profit-taking in AI and tech shares cast a long shadow over markets on Wednesday, depressing the price of stocks and bonds while lifting the dollar and oil.
In my column today, I look at why Japan may be "in the money" from its FX interventions. This runs counter to the view that the yen's slide back to previous intervention levels means Tokyo's efforts to support its currency have been in vain.
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
1. When IPOs go wrong: SpaceX, AI firms face a delicate process
2. U.S. stock options watchers warn Wall Street's rally 'ripe for volatility spasms'
3. Wild stock moves beneath an eerily calm surface: Mike Dolan
4. AI building boom ripples through inflation-hit Treasury market
5. U.S. cites forced labor concerns as grounds for new tariffs
Today's Key Market Moves
• STOCKS: Japan's Nikkei +2.5% to new high, Brazil -2%, Dow -1.2%, Nasdaq -0.9%.
• SECTORS/SHARES: Seven sectors on the S&P 500 fall, five rise. Tech -1.5%, energy +1.4%. IBM -7%, Nvidia -4%, Walmart +3.5%. Broadcom hits record high then -7% after the bell.
• FX: Dollar index posts highest U.S. close in two months. USD/JPY touches 160.00 "intervention zone" level. NZD and SEK both -1%, biggest G10 movers.
• BONDS: U.S. yields +4 bps at short end, 2026 Fed hike probabilities rise.
• COMMODITIES/METALS: Oil +2%, gold -1%. Other precious metals down 3-5%.
Today's Talking Points
* IP-Oh...
Trillion-dollar IPOs are the talk of the Street. SpaceX's upcoming IPO is expected to value the company at $1.75 trillion, while the Anthropic and OpenAI listings could value both at $1 trillion each. There is some doubt over the market's capacity to absorb the new equity supply, but we'll see how that pans out.
Recent history, however, suggests investors should be wary of chasing big IPOs. Sam Grelck at Truist Advisory Services notes a highly mixed record in the weeks, months and year after major U.S. listings, while every one recorded at least one hefty drawdown in the 12 months after.
* In the zone
The yen dipped below 160 per dollar on Wednesday, breaching the unofficial threshold many observers reckon is the trigger for Tokyo to intervene in the FX market and prevent the currency from weakening further. The yen is in the "intervention zone".
The last time the yen was below 160 per dollar was April 29, prompting Japan to sell a record $73.5 billion. Yet here we are again only weeks later. Many observers say this is a sign that intervention has failed. The reality may be a bit more nuanced.
* Talking surprises
Three U.S. economic indicators on Wednesday, three beats. There are reasons to be cautious on the U.S. economy - not least high and rising inflation, and the threat it poses to consumer spending - but right now, the numbers suggest the economy is in good shape. And getting better.
Look at Wednesday's data: private sector payrolls in May were the highest since January last year, factory orders in April posted their biggest gain in 11 months, and service sector activity in May expanded faster than expected. The U.S. economic surprises index is now the highest since October 2023. Maybe we should be less surprised.
What could move markets tomorrow?
• Developments in the Middle East
• Australia trade (April)
• Euro zone retail sales (April)
• European Central Bank President Christine Lagarde speaks
• Bank of England Governor Andrew Bailey speaks
• UK PMI (May)
• U.S. weekly jobless claims
• U.S. Challenger jobs layoffs (May)
• U.S. productivity, labor costs (Q1, revised)
• U.S. Federal Reserve officials scheduled to speak include Richmond Fed President Thomas Barkin, San Francisco Fed President Mary Daly, and Vice Chair for Supervision Michelle Bowman
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(Reporting by Jamie McGeever; Editing by Nia Williams)
