Global stock indexes rose and the dollar fell to its lowest against the yen in almost a month yesterday after the Bank of Japan overhauled its monetary policy to target interest rates and ahead of a Federal Reserve decision.
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Stocks are opening higher on Wall Street as energy stocks rise along with the price of crude oil. The dollar weakened, with emerging market currencies strengthening the most.
Other commodities were also rising, which helped out materials stocks.
Three members of the Federal Open Market Committee dissented from the decision to keep rates on hold, including Eric Rosengren, a traditionally dovish member of the committee who sent markets tumbling when he said earlier this month that there was a “reasonable case” for gradual rate hikes.
Yellen said the differences inside the FOMC mainly came down to the timing of rate increases, not to whether they should be carried out. “The tide lifts all boats and the ones being lifted the most are the so-called high yielders”. Also, investors preferred safe-haven assets after the central bank lowered its economic growth forecast. Global equities have risen 5.3%, while a gauge of commodity prices advanced 9%, and the Bloomberg Barclays Global Aggregate Total Return Index is up 9.1% in 2016. Brent crude, used to price worldwide oils, rose 36 cents to $47.19 in London. Fingerprint Cards AB added 4.8% after a report that a Chinese company approached the Swedish maker of biometric sensors this summer about a potential merger.
Owing to weak growth in the first half of this year, the Fed trimmed its forecast for USA economic growth in 2016 to 1.8 per cent from 2 per cent and dialled back the number of rate hikes to two next year from three. On the other side of the Atlantic, the USA initial jobless claims for the week ended September 17 are due out at 13:30 BST, followed by the nation’s existing home sales for August at 15:00 BST.
“The change in expectations over the period have had a dramatic impact on risky assets and on the U.S. dollar”.
Shares of Apple rose 0.9 per cent to US$114.56 and was the top influence on the S&P and the Nasdaq after Nomura and RBC raised their price targets.
Although markets were closed in Japan for a holiday, Thursday’s rally in bonds extended to Europe, where the yield on the 10-year German bond dropped to minus 0.093% from just above zero percent on Wednesday, according to Tradeweb.
The dollar is now slightly below levels this time last year after briefly spending time above 100 in March and November last year.
The S&P 500 .SPX was up 12.46 points, or 0.58 percent, at 2,175.58. The Japanese central bank’s policy tweaks give it scope to keep easing to revive the economy and inflation, while limiting the negative impact on bank earnings.
Asian equity markets built on the previous day’s Japan-fuelled strong performance. Australia’s and Canada’s dollars appreciated at least 0.5 percent versus the greenback.
Still, Yellen appeared to tip toe on the case for and against a rate hike.
Bond markets rallied across Asia, led by a surge in New Zealand’s 10-year securities.
Ahead of the decision, MSCI’s broadest index of Asia-Pacific shares outside Japan was flat, perched at its highest levels since September 12. On the Nasdaq, 1,804 issues rose and 429 fell.
The difference between Treasury two- and 30-year yields fell for a fifth day, declining to about 1.57 percentage points. However, the USA dollar has not followed suit, weakening following the Fed announcement.
A rate hike could boost the bank’s earnings and investors can foresee a potential upside in the stock. The euro and pound extended gains.
TAKE A PICTURE: Shares of GoPro, the activewear camera company, rose $1.14, or 8 percent, to $16.11 after the company announced updates to its Hero camera products.
METALS: Precious and industrial metals rose broadly.
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With three years of massive money printing failing to push up inflation, the BOJ is expected to move away from the shock therapy of massive stimulus toward a more protracted battle against deflation, say sources familiar with its thinking.
