BackWorld markets rise after BOJ easing
Bank of Japan to increase its asset buying and loan program by 10 trillion to 80 trillion
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New York: US and European shares rose on Wednesday after two days of declines, helped by US housing data, while the yen rose after a brief decline on the Bank of Japan’s decision to ease monetary policy further.
Oil prices fell more than 3% and extended their recent losses on comments from Saudi Arabia that it would take action to keep prices in check. Prices also weakened on US data that showed crude stocks climbed far more than expected.
Equities have struggled for direction in recent sessions. Recent accommodative policy moves from the Federal Reserve, European Central Bank and now Japan’s central bank are seen as limiting downside, but concerns persist about Europe’s debt crisis and slowing growth.
Those concerns limited Wednesday’s equities gains and pushed the euro back above $1.30 against a mildly stronger dollar .
“The Bank of Japan is following a similar path as the ECB and Fed, which shows how sluggish their economy is, though it shouldn’t have much impact outside Japan," said Brad Thompson, managing director at Frost Investment Advisors in San Antonio, which has about $9 billion in assets.
“What’s more important now is whether Spain will be able to come to an agreement on fiscal reform."
Japanese stocks rallied to four-month high after the BOJ said it would increase its asset buying and loan program, currently its main monetary easing tool, by ¥10 trillion ($127 billion) to ¥80 trillion.
European shares closed 0.4% higher. The MSCI index of global stocks rose 0.44%.
In US economic news, existing home sales rose at their fastest pace in two years, the latest indication a recovery in the housing market was gaining traction. An index of housing shares rose 2.2%.
The Dow Jones industrial average was up 49.13 points, or 0.36%, at 13,613.77. The Standard & Poor’s 500 Index was up 5.38 points, or 0.37%, at 1,464.70. The Nasdaq Composite Index was up 10.37 points, or 0.33 percent, at 3,188.17.
The Bank of Japan action helped somewhat to offset concerns about tensions between Japan and China over a disputed group of islands in the East China Sea, as it could cushion any negative impact to Japan’s exports.
The dollar jumped to ¥79.21, its highest since 22 August, after the BOJ’s decision. It last traded at ¥78.39, down 0.4% on the day.
In the bond market, the benchmark 10-year US Treasury note was up 8/32, the yield at 1.784%.
Brent crude oil prices sank 3.6% to $107.94. Brent is down about 7.5% so far this week, though it remains up 10% over the past three months.
Gold, which has a twin appeal as a safe-haven asset and inflation hedge, shrugged off the concerns and held near a 6-1/2-month high of $1,772.49 an ounce.
China’s economy remains a major worry for global markets. The government said on Wednesday the export outlook was grim and demand may be weaker in the next few months than it has been so far this year.
“With the European Central Bank, the US Federal Reserve and now the Bank of Japan - the world’s major central banks - moving to ease, there will now be expectations for the PBOC (People’s Bank of China) to follow suit," said Jackson Wong, Tanrich Securities’ vice-president for equity sales.
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