There is growing speculation that Prime Minister Shinzo Abe will soon announce an aggressive new spending program, to be financed by zero-coupon perpetual bonds that would be bought by the Bank of Japan. “We’re seeing a worldwide phenomenon of negative interest rates, which is driving money into the equity markets”.
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Injecting a cautionary note into the run-up today, the chief executive of the world’s largest asset manager said the current rally may not be justified and won’t last unless earnings pick up.
Line Corp. rose 27 percent, and as much as 35 percent, in its US trading debut after the Japanese messaging company raised more than $1 billion in the biggest technology initial public offering of the year. “If we don’t see better-than-anticipated corporate earnings I think the rally will be short lived”, BlackRock Inc.’s Laurence D. Fink said in an interview.
Hopes of a helicopter rescue for the Japanese economy have buoyed the Japanese share market this week, while the Japanese yen has dropped almost 5 per cent against the United States dollar.
The Dow Jones industrial average rose134.3 points, or 0.73 per cent, to close at 18,506.41 while the Nasdaq gained 28.33 points, or 0.57 per cent, to 5,034.06. The broader All Ordinaries measure climbed 21 points to 5491.8.
The recent run by the market, set to be the longest streak of gains since December, has taken it to an 11 month high. A Citigroup gauge that tracks the degree to which data are exceeding economist projections has jumped to the highest level since January 2015. Meanwhile, the MSCI World Index of developed markets has gained about 2 per cent in the period.
In the currency market, the USA dollar is trading in the upper 105 yen-range on Friday.
All the same, investors were pleasantly surprised that after such a volatile quarter, JP Morgan was able to report net income of $US6.2 billion, a dip of only 1 per cent compared to a year earlier.
“The predominant theme in the market this morning is one of increasing confidence, particularly within the banking and energy sectors”, said Gary Huxtable, a client adviser at Atlantic Pacific Securities. Earlier in the day, the Bank of England unexpectedly refrained from cutting interest rates but signaled more action next month after policymakers get more assessments on economic growth. The gains coincided with U.S. Treasury yields rising for the third time in four days to the highest since June 24.
West Texas Intermediate crude oil rose 1.9 per cent to $US45.59 a barrel, after tumbling 4.4 per cent on Wednesday as USA data showed crude stockpiles fell an eighth week, the longest declining streak since June 2015.
The LME Index of six base metals rose to the highest since October 15 yesterday as nickel climbed on potential supply disruptions and copper advanced on speculation policy makers’ efforts to spur economic growth will boost demand for metals.
Gold in the spot market declined 0.9 per cent to US$1,331.03 an ounce, after gaining 0.7 per cent in the last session. It was a good day for many miners on the TSX Venture.
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Sovereign debt fell in the USA, the UK, Japan and Germany.
