Sydney: Asian stocks rebounded on Thursday after having suffered their biggest one-day fall in four months, while the yen held firm against a broadly weaker dollar, taking details of the Bank of Japan’s stimulus plan in its stride.
European shares took their cue from Asia with London’s FTSE 100 index gaining 0.7% at the open and Germany’s DAX climbing 0.5%. U.S. stock index futures were all up between 0.1 and 0.2%.
The BOJ said it would meet next week, bringing forward the 15-16 November policy meeting to speed up the launch of a ¥5 trillion ($61 billion) asset buying plan aimed at helping the economy cope with a strong yen. It kept interest rates unchanged near zero as widely expected.
“What stands out is that the BOJ rescheduled its next meeting, bringing it forward, which suggests the central bank wants to make sure it can take action if needed after the FOMC,” said Takeshi Minami, chief economist at Norinchukin Research Institute, referring to the U.S. central bank meeting on Nov. 2-3.
The MSCI index of Asia Pacific stocks outside Japan rose 0.7%, having slid nearly 2% on Wednesday to post its biggest one-day%age fall since late June. Still, it remained close to a 28-month high hit last week.
Financial markets have been volatile this week as speculation intensifies over how much the Federal Reserve is likely to spend to pump up a faltering recovery and whether such new measures will be carried out swiftly or phased in over time.
Analysts expect choppy market action to persist in the lead up to next week’s meeting.
Market participants have begun to scale back expectations of the size of any additional stimulus with The Wall Street Journal reporting on Wednesday that Fed officials wanted to avoid a “shock and awe” approach..
“I think the Fed is trying to prepare the market for incremental QE2 and this whole pre-announcement, in a way, is to cushion the impact if it comes out on November 3rd that it is only $100 billion rather than $1-$2 trillion,” said V. Anantha-Nageshwaran, CIO of Julius Baer in Hong Kong.
Asian governments are worried about the impact this might have on their economy. South Korean Finance Minister Yoon Jeung-hyun said on Thursday the government needs to guard against a potential asset bubble caused by excessive liquidity.
Japan’s Nikkei stock average, which was spared the selloff seen in the region on Tuesday, slipped 0.2% to end at a six-week low, while Hong Kong’s Hang Seng index gained 0.3% and Australia’s S&P/ASX 200 index rose 0.8%.
Among the top performers, shares in Canon Inc rallied more than 3% after the world’s largest maker of digital cameras posted strong quarterly results and raised its full-year outlook.
In Australia, upbeat earnings helped drive ANZ shares up about 3%, while bourse operator ASX climbed 1.5% after two days of sharp losses due to uncertainty over Singapore Exchange’s $7.9 billion bid.
The MSCI’s emerging market stock benchmark rose 0.2%.
The selloff in commodities also halted with copper, which dropped more than $200 a tonne on Tuesday, its steepest decline since late June, gaining $30 to $8,330 a tonne.
U.S. light sweet crude oil was little changed at $82.00 per barrel, while spot gold was also steady near $1,326.00 an ounce.
The US dollar eased against a basket of six major currencies after two straight days of gains helped the index climb back into positive territory for 2010.
The euro rose to $1.3833 from $1.3764 late in New York, while the dollar eased to ¥81.42 from ¥81.69, hovering not far from a record low of ¥79.75.
The dollar’s decline also coincided with a pullback in US Treasury yields, which gained sharply in the past few sessions as the market scaled back expectations of the size of Fed’s likely asset purchase programme.
The US 10-year yield was last at 2.69%, down from a one-month high of 2.73% set on Wednesday.
“Overall, we still see the risk for the FOMC next week is going to be towards U.S. dollar strength once the dust settles,” said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong.
“Much of the market is pretty much expecting $100 billion per month for the next six months or so. So we’ll need to see asset purchases in excess of that in order to generate fresh U.S. dollar weakness.”