The yen sank yesterday after the Bank of Japan unveiled a bold plan to pump money into the economy, pushing the dollar higher, while US stocks were little changed as investor reassurances over central bank policies were offset by soft economic data.
The number of Americans filing new claims for unemployment benefits hit a four-month high last week, the Labor Department reported, a potential sign the US labour market recovery lost steam in March.
The BoJ surprised markets when it unleashed the world’s most intense burst of monetary stimulus, planning to nearly double the monetary base to 270 trillion yen ($2.9 trillion) by the end of 2014, in a shock therapy to end two decades of stagnation.
The dollar and euro soared more than three per cent against the yen in their biggest one-day moves since 2008 after the BoJ took the action to fight deflation.
“The Japanese news was significant to show that there is going to continue to be, on a global basis, easy money, which supports stocks,” said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.
The dollar rose as high as 96.41 yen, approaching a three-and-a-half-year peak of 96.71 set on March 12. It was last trading at 96.16 yen, up 3.35 per cent on the day and on track for its best day since October 2008. The euro soared 3.62 per cent to 123.84 yen, the biggest one-day move since November 2008.
The Dow Jones industrial average was down 0.76 point, or 0.01 per cent, at 14,549.59. The Standard & Poor’s 500 Index was down 0.02 point, or 0.00 per cent, at 1,553.67. The Nasdaq Composite Index was down 7.37 points, or 0.23 per cent, at 3,211.24.
Investors are skittish after several weak readings on the economy this week,” said Jack DeGan, chief investment officer of Harbor Advisory.
“There is a fear of this being the start of a ‘spring swoon’,” DeGan said.
“I don’t think that is the case, but until we get a couple of real inputs that the economy is improving, the rally is likely to stall considering how far we’ve come this year.”
On Wednesday, data on private-sector hiring disappointed, spurring concerns about today’s government payrolls report, which is expected to show that 200,000 jobs were added in March.
Peter Cardillo, chief market economist at Rockwell Global Capital in New York, said the rise in jobless claims indicated the sequester was taking a toll on the labour market.
“The economy is slowing, the job market is slowing, and the Fed is not changing its policy,” Cardillo said.
Initial claims for state unemployment benefits increased 28,000 to a seasonally adjusted 385,000 last week, the highest level since November, the Labor Department said.
European shares fell sharply as traders, unhappy by the lack of fresh economic stimulus measures from the European Central Bank, took profit on recent sectoral outperformers.
The ECB kept its interest rates on hold and did not unveil any new initiative, such as special credit schemes for small enterprises, which some traders had been hoping for after recent weak economic data.
The pan-European FTSEurofirst 300 index extended losses after ECB President Mario Draghi spoke in the afternoon, to end 1.1 percent lower at 1,180.65.
MSCI’s world equity index slipped 0.44 percent to 356.10.
US Treasury debt prices rose, pushing yields to near three-and-a-half-month lows, after the jobless claims data suggested that the government’s monthly employment report due out today could show the labour market lost some steam in March, an outcome that would favour safe-haven US debt.
The benchmark 10-year US Treasury note was up 15/32 in price to yield 1.7625 per cent.
Crude oil futures dropped as the increase in US claims for unemployment benefits heightened concerns about economic growth in the world’s top oil consumer.
Brent futures for May delivery fell $1.36 to $105.75 a barrel.
US crude slumped $1.76 to $92.69 a barrel.
Spot gold prices fell $8.39 to $1,548.90 an ounce. (Reuters)