A week packed with central bank policy decisions continued on Tuesday with the Bank of Japan (BOJ) keeping its ultra-loose monetary policy unchanged. In the Asia-Pacific region, stock markets reacted positively, except for Japan’s Nikkei 225, which was fell slightly. A day earlier, European stocks were higher across the board, while the major US stock indices reached new highs again. Oil was trading higher due to increased tensions in the Red Sea.
The BOJ left its ultra-easy monetary policy unchanged on Tuesday, a move expected by most market participants. The central bank left the target for short-term rates at -0.1% and the target for 10-year bond yields at 0%. It is the only central bank still maintaining a negative rate target, which has been in place since 2016. The central bank noted on Tuesday that the likelihood of being able to end its massive stimulus was continuing to rise but it needed more time to watch wage growth, which is necessary to push inflation to its 2% target for a sustainable period of time. Many traders believe the BOJ will raise its short-term rate target into positive territory this year.
In Tokyo, the Nikkei 225 lost 0.1% following the BOJ move. Hong Kong's Hang Seng Index came bouncing from losses the previous day, gaining more than 3% higher on Tuesday, while the Shanghai Composite was up 0.7%. The gains follow a media report that said Chinese authorities are putting together another package of stimulus measures intended to stabilise the stock market after last year’s economic reopening failed to impress investors. In South Korea, the Kospi gained 0.6% and Australia’s S&P/ASX 200 ended Tuesday’s session up 0.5%.
Markets were already looking ahead to the next central bank interest rate decisions: European Central Bank’s (ECB) interest rate decision is due on Thursday and the US Federal Reserve announces its latest policy decision next week. Last week, hawkish comments by ECB President Christine Lagarde and Governing Council member Klass Knot forced investors to push back their timelines for expected interest rate cuts, putting markets under pressure. However, a string of economic data released from the continent last week pointed towards a quick economic cooldown on the continent, which could prompt the ECB to move sooner rather than later. The Euro Stoxx 50 closed up 0.7% on Monday with all major European indices rallying.
In New York, the major stock indices jumped to new highs during Monday’s session before backing off to close with more moderate gains. The Dow Jones Industrial finished the day up 0.4% and the S&P 500 gained 0.2%. The Nasdaq-100 closed up 0.1%.
Oil prices increased with West Texas Intermediate trading around USD 75 and Brent at about USD 80 per barrel as geopolitical concerns caught traders’ attention again. The US and Britain unleashed a fresh wave of airstrikes on Yemen on Monday. The Iran-aligned Houthies have been launching attacked from Yemen on shipping vessels in the Red Sea, causing concerns that the global shipping route - which is particularly important for energy transportation - could be fully closed down if the situation escalates.
Corporate news in focus: Quarterly figures from Ericsson, General Electric, Johnson & Johnson, Logitech, Netflix, Procter & Gamble, Verizon and Visa.
Economic data in focus: EU and eurozone Consumer Confidence Indicator, Richmond Fed Manufacturing Index.
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.