Stock markets around the world rose yesterday and the yen hit a seven-year low as news of a surprise election and a delayed tax increase in Japan strengthened hopes for new stimulus measures a day after data showed the country was back in recession.
Japan’s currency fell through 117 yen to the dollar, a low last touched during October 2007, but recovered some as the US dollar declined against the euro and other major currencies,
Bond yields eased.
Oil prices dropped again, with Brent under $79 a barrel.
Investors also cheered a better-than-expected reading of German investor and analyst sentiment, which pointed to a more positive outlook for Europe’s No. 1 economy.
The MSCI index of world stocks was up 0.74 per cent. Shares in Tokyo rose 2.2 per cent, while the pan-European FTSEurofirst 300 gained 0.6 per cent.
Wall Street got additional lift from merger deals and benign US inflation data. The S&P 500 was last up 0.53 per cent to 2,052.19, which was above a record top touched on Monday. Other indices were also up.
Japanese Prime Minister Shinzo Abe’s call for Parliament to be dissolved on Friday is seen as likely to bring more measures to stimulate growth.
The yen fell against the dollar after Abe’s comments, extending recent losses in the wake of stimulus measures announced by Japan’s central bank. But some investors later unwound positions, putting dollar/yen at 116.69.
The euro rose as high as $1.2540 and core eurozone bond yields climbed after the German survey, which added to optimism after European Central Bank chief Mario Draghi said on Mondayhe was ready to do more to boost growth.
“The first rise all year in German investor optimism helped ignite a short-covering rally for the euro,” said market analyst Joe Manimbo of Western Union Business Solutions in Washington.
The dollar index was off 0.44 per cent.
US Treasury debt prices edged higher after a core inflation measure showed just a tepid rise in prices last month, affirming expectations the Federal Reserve will take its time raising interest rates.
Benchmark 10-year US Treasury note were last up 4/32 in price to yield 2.33 per cent, from 2.34 per cent late on Monday.
German Bund yields hovering near record lows have weighed on Treasuries. The German 10-year was last up 0.035 in price, yielding 0.798 per cent.
Brent crude oil fell below $79 a barrel as traders tested Opec’s willingness to agree on a coordinated output cut.
Brent crude, which traded above $115 as recently as June, was down 49 cents to $78.82 per barrel while US crude lost 97 cents to $74.67.