Nasdaq ends best quarter in 6 years as yen extends drop against dollar
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NEW YORK: The tech-rich Nasdaq capped its best quarter in six years on Tuesday (Jun 30), rising with other US indices as bullishness over artificial intelligence overcame worries over geopolitics and inflation.
The Nasdaq finished Tuesday's session up 1.5 per cent at 26,213.72, taking its gains to 21.4 per cent over the three months through June. The S&P 500 rose along with the Dow, which finished at a second straight record.
"Very often when we have a really good quarter, you see profit-taking on the last day," said FHN Financial's Chris Low. "We're not seeing that today which shows optimism about the third quarter as well."
Some of that positive sentiment stems from the pullback in oil prices since the United States and Iran agreed on a memorandum of understanding in the Middle East war that has significantly lifted tanker traffic in the Strait of Hormuz.
"If we go into the second half of the year with lower energy prices, that should help restore GDP growth," Low said.
AI-linked shares had suffered a pullback in recent weeks as investors questioned whether their soaring valuations were excessive. But Tuesday's session saw a return to the trend that dominated much of the quarter.
Elsewhere Tuesday, Europe's main equity markets closed in the green.
YEN AT 40-YEAR LOWS
After a shaky start, Asian investors pushed tech companies higher Tuesday.
Seoul's Kospi index rose one per cent but was still down from a recent record high touched before a rout last week. The index, which includes chipmakers SK hynix as well as Samsung - soared almost 68 per cent during the quarter.
In Tokyo, the focus was on the yen amid speculation that Japan's government could intervene in currency markets to push it higher against the dollar.
The yen has fallen to 40-year lows against the dollar and sank as low as 162.67 per dollar amid expectations the US Federal Reserve would lift interest rates this year.
The moves came ahead of US jobs data Thursday, with analysts warning that a stronger-than-expected reading could fan bets on a Fed rate hike sooner rather than later.
"If the jobs report comes in strong, it could put upward pressure on yields as investors price in higher odds of a July rate hike," said eToro analyst Bret Kenwell.
An increase in borrowing costs to a 31-year high by the Bank of Japan this month did little to support the yen, with government officials' warnings of an intervention also falling short.
Finance Minister Satsuki Katayama was reported by local media as saying Tuesday that Tokyo "will take appropriate action at any time as necessary."
"A major catalyst behind the dollar's move has been the arrival of new Federal Reserve chair Kevin Warsh, whose public comments have been interpreted as notably more hawkish" than US President Donald Trump might have wished, said Axel Rudolph, an analyst at IG.
"Warsh has repeatedly stressed the importance of maintaining the Fed's inflation-fighting credibility and has signalled a willingness to keep policy restrictive if price pressures prove persistent," he said.
Rudolph added that "the prospect of higher US interest rates has widened the expected policy gap between the United States and many of its major trading partners, increasing demand for dollar-denominated assets."
The prospect of higher US interest rates also constitutes a potential headwind to US equities in the second half of the year.
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