The yen sank back past 131 per dollar after the Bank of Japan left monetary policy unchanged
London (AFP) - Tokyo’s stock market surged Wednesday, with exporters boosted by a tumbling yen after the Bank of Japan decided against further tweaking monetary policy.
Equities elsewhere struggled as traders showed caution in the face of growing talk that major economies may dodge recession this year as inflation cools from sky-high levels.
Weak US retail sales data and 10,000 layoffs at tech giant Microsoft dampened sentiment.
Still, hopes for China’s recovery continued to provide much-needed support, with Vice Premier Liu He telling the Davos forum that growth would likely rebound this year as the country reopens after zero-Covid.
His comments came after data showed the Chinese economy expanded last year at its slowest pace since 1976 – excluding pandemic-hit 2020 – but still beat forecasts.
The news added to hopes for a global recovery after last year’s pain caused by rising prices, rate hikes, China’s economic woes, the war in Ukraine and the spike in energy costs that it caused.
“Last fall, there was broad consensus that China was in the wrong place, Europe was slipping into a recession, and the Fed was ultimately caught ‘wrong-footed’ by very sticky inflation,” said SPI Asset Management’s Stephen Innes.
“But fast-forward to these early weeks of January, and China’s reopening has put the country on a path to much better growth, investors are far more optimistic about Europe’s recovery, and the bane of all ills, US inflation, is even starting to recede.”
- Dollar falls against euro -
Oil prices continued to win support Wednesday on expectations of rising Chinese demand.
In foreign exchange, the yen slid one percent against the dollar.
Traders had been keenly anticipating the Bank of Japan decision after it last month shocked markets by announcing a tweak that allowed its tightly controlled bond yields to move in a wider bracket.
Clifford Bennett, chief economist at ACY Securities, said the decision indicated the BoJ was “acting appropriately in what is still an uncertain economic growth path, and still low inflation levels”.
While other central banks have hiked rates, “Japan has long been a different story and remains so”, he noted.
The move in December sent the yen soaring, and while the bank held firm Wednesday, there is a growing expectation that officials will eventually move away from the policy of buying up bonds to keep yields in check.
“Speculation will remain that it will eventually review its policy,” Takahide Kiuchi, executive economist at Nomura Research Institute and a former BoJ policy board member, told AFP.
The yen later rebounded as the dollar tumbled following disappointing US retail sales data. The dollar sank to a nine-month low against the euro.
US retail sales fell by a more-than-expected 1.1 percent in December from the previous month, which was also revised lower, although they were up 6.0 percent from December 2020.
But producer prices continued to decline, dropping by 0.5 percent month-on-month in December, and falling to a 6.2-percent annual increase from 7.3 percent in November.
Shares in tech giant Microsoft slumped 1.2 percent after it confirmed it would cut 10,000 jobs due to the poor economic outlook.
Wall Street stocks were lower in late morning trading, the Dow down 1.0 percent.
In Europe, London’s benchmark FTSE 100 index shed 0.3 percent as data showed UK inflation had slowed to 10.5 percent in December, remaining at around four-decade highs.
Frankfurt dipped less than 0.1 percent and Paris edged higher.
- Key figures around 1630 GMT -
New York - Dow: DOWN 1.0 percent at 33,584.23 points
EURO STOXX 50: FLAT at 4,174.34
London - FTSE 100: DOWN 0.3 percent at 7,830.70 (close)
Frankfurt - DAX: DOWN less than 0.1 percent at 15,181.80 (close)
Paris - CAC 40: UP less than 0.1 percent at 7,083.39 (close)
Tokyo - Nikkei 225: UP 2.5 percent at 26,791.12 (close)
Hong Kong - Hang Seng Index: UP 0.5 percent at 21,678.00 (close)
Shanghai - Composite: FLAT at 3,224.41 (close)
Dollar/yen: UP at 128.46 yen from 128.13 yen on Tuesday
Euro/dollar: UP at $1.0822 from $1.0794
Pound/dollar: UP at $1.2366 from $1.2285
Euro/pound: DOWN at 87.51 pence from 87.85 pence
Brent North Sea crude: UP 1.4 percent at $87.14 a barrel
West Texas Intermediate: UP 1.7 percent at $81.55 a barrel