Thursday, 22 January 2015 00:00
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Reuters: Asian shares held firm and the euro stayed under pressure on Wednesday as investors counted on the European Central Bank to unveil a stimulus drive, while the yen jumped after the Bank of Japan left policy unchanged.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.1% to hit its highest level in six weeks.
Japan’s Nikkei bucked the trend by slipping 0.9% and the yen gained 0.8% to 117.83 to the dollar after the BOJ did not expand its stimulus.
While the decision had been widely expected, some players had bet on a surprise from BOJ Governor Haruhiko Kuroda, as the central bank’s inflation target for next year looks increasingly illusive.
The BOJ maintained its money-printing target while tinkering with expiring loan schemes to support bank lending. It stuck to a bullish inflation outlook for 2016 even though it cut its 2015 projections following falls in oil prices in recent months.
On the whole, global share prices have been supported in recent sessions by growing investor conviction that the ECB will adopt quantitative easing at its meeting on Thursday.
“The ECB is the biggest focus this week. We were initially expecting an action in March but we now expect it this week,” said Shuji Shirota, Associate Director at HSBC in Tokyo.
The FTSEurofirst 300 index of top European shares climbed to a seven-year high on Tuesday, led by German shares, which hit record highs.
The euro was soft at $1.1570, having fallen from above $1.16 touched on Tuesday to get closer to an 11-year low of $1.14595 set last week.
Still, uncertainties on exactly what the ECB will do kept many investors on guard, especially given that Germany’s Bundesbank is reluctant to see large scale money-printing.
“The market appears to be looking to quantitative easing of at least 500 billion euro... but there is a chance the ECB’s action is less aggressive than some are hoping for,” said HSBC’s Shirota.
Gold extended its 1.3% rise on Tuesday to hit a five-month high, supported by expectations of ECB money-printing. It edged up to at $1,298.00 per ounce.
Commodity prices remained under pressure, however, with oil falling as much as 5% at one point on Tuesday after the International Monetary Fund cut its 2015 global economic forecast.
Also souring sentiment, key producer Iran hinted that prices could drop to $25 a barrel without supportive OPEC action.
Benchmark Brent crude last traded at $48.33 a barrel, slipping towards a six-year low of $45.19 hit last week.
