Volkswacht Bodensee - US stocks retreat while yen gains on Bank of Japan rate hike

After a flattish open, major US indices tumbled into the red. The S&P 500 finished down 0.3 percent after closing at a record high on Thursday.

"This is normal consolidation or profit taking after a big 2-week rally," said Adam Sarhan of 50 Park Investment.

Wall Street stocks have gained in recent sessions following benign US inflation data, strong earnings from banks and the new presidency of Donald Trump in Washington.

Markets have thus far welcomed his growth-oriented agenda and largely shrugged off his threats of tariffs.

Sarhan said the market was poised for a pause given the heavy calendar next week, which includes a Federal Reserve monetary policy decision and earnings from tech giants and other big companies.

In Europe, both London and Frankfurt stocks hit fresh record highs before turning lower. Paris ended the day with a gain, led by luxury stocks after British fashion house Burberry showed signs of recovery.

In Japan, Tokyo's stock market dropped and the yen rallied after the Bank of Japan lifted borrowing costs to their highest level since 2008 and flagged further increases in the pipeline.

Even as other central banks have raised borrowing costs in recent years -- and started cutting again in 2024 -- the BoJ has remained an outlier.

But it concluded last March that Japan's "lost decades" of economic stagnation and static or falling prices were over, finally lifting rates above zero.

In other Asian trading, Hong Kong gained nearly two percent and Shanghai also advanced following Trump's latest comments with regard to China.

In an interview broadcast Thursday night, Trump said he would "rather not" impose tariffs on China and signaled openness at negotiating a trade deal with Beijing.

"We have one very big power over China, and that's tariffs, and they don't want them, and I'd rather not have to use it," Trump told Fox News. "But it's a tremendous power over China."

"Clearly these are off-the-cuff remarks but it has left the overnight market feeling like there's a scenario where China escapes the worst of the tariff regime," said Jim Reid, managing director at Deutsche Bank.

Trump's remarks earlier Thursday before the World Economic Forum in Davos calling for lower interest rates added to pressure on the dollar.

- Key figures around 2140 GMT -

New York - Dow: DOWN 0.3 percent at 44,424.25 (close)

New York - S&P 500: DOWN 0.3 percent at 6,101.24 (close)

New York - Nasdaq Composite: DOWN 0.5 percent at 19,954.30 (close)

London - FTSE 100: DOWN 0.7 percent at 8,502.35 (close)

Paris - CAC 40: UP 0.4 percent at 7,927.62 (close)

Frankfurt - DAX: DOWN 0.1 percent at 21,394.93 (close)

Tokyo - Nikkei 225: DOWN 0.1 percent at 39,931.98 (close)

Hong Kong - Hang Seng Index: UP 1.9 percent at 20,066.19 (close)

Shanghai - Composite: UP 0.7 percent at 3,252.63 (close)

Dollar/yen: DOWN at 155.93 yen from 156.05 yen on Thursday

Euro/dollar: UP at $1.0500 from $1.0415

Pound/dollar: UP at $1.2484 from $1.2353

Euro/pound: DOWN at 84.06 pence from 84.31 pence

West Texas Intermediate: UP 0.1 percent at $74.66 per barrel

Brent North Sea Crude: UP 0.3 percent at $78.50 per barrel

burs-jmb/st

G.Haefliger--VB