Asian stocks swung between gains and losses as the yen strengthened in volatile trading before the Bank of Japan’s policy decision.
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Markets are on the fence as to whether or not the BoJ will alter its current monetary policy tonight, but Abe’s announcement may have put pressure on the BoJ to act given the close relationship the central bank has with government.
European shares .FTEU3 fell on Thursday, however, as markets awaited the release of the stress test results on European banks on Friday night.
Data from the Commerce Department released Thursday showed the USA trade gap widened to a seasonally adjusted $63.3 billion in June (http://www.marketwatch.com/story/us-trade-gap-widens-and-retail-inventories-rise-in-new-advance-look- at-economy-2016-07-28).
“This naturally raises market expectations about whether the BOJ has made a policy move when delaying its announcement”, say Rochester and Goto. Australia’s second quarter producer price index numbers are expected.
MSCI’s broadest index of Asia-Pacific shares outside Japan.MIAPJ0000PUS was flat in early trade while Japan’s Nikkei .N225 slipped 0.1 percent.
“Crucial to how the yen responds will be the response in bank stocks”.
The yen had gained earlier on Thursday on expectations that the BOJ could disappoint investors. It was unchanged at 105.45 yen on Thursday.
On Wednesday, the Japanese government unveiled a surprisingly large 28 trillion yen ($267.58 billion) stimulus package, firmly placing the stimulus ball in the central bank’s court.
A sizable increase in bond purchases, combined with an expansion of risky assets such as exchange-traded funds (ETF), would be the most likely option if the BOJ wants to shock markets with a large-scale easing, according to sources familiar with the bank’s thinking. Retail sales grew slightly less than was expected.
Oil was on track for its worst month in a year, with West Texas Intermediate crude down another 0.1 per cent to US$41.10 a barrel, its lowest level since April 19.
Crude’s decline gathered pace after USA government data showed stockpiles of the commodity climbed for the first time since May last week, as output rose.
The yield on the benchmark USA 10-year note was 1.51 percent, up from 1.50 percent the day before.
The extent of the problem the government and the BoJ are looking to fix will be set out in the usual end of month data dump in Japan.
The mildly disappointing data supported the notion the US economy is not strong enough for the Federal Reserve to raise interest rates before the end of the year at the earliest; on Wednesday, the Fed left interest rates unchanged.
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Ten-year Treasury yields retreated by one basis point to 1.49 per cent, falling for the third time in four days, while rates on similar maturity Japanese debt declined one basis point to negative 0.28 per cent.
