A tweak to the Bank of Japan’s bond-buying programme shunted the yen higher yesterday, while gains from commodity stocks as oil hit its highest since 2015 helped world shares maintain their flying start to the year.
MSCI’s all-country world stocks index posted another record high as Europe’s markets shrugged off a tech wobble in Asia and instead cheered Christmas trading updates, the oil gains and more positive data from Germany.
Wall Street was expected to inch to fresh peaks too though there will be plenty of cross-market cross-winds to tack through.
US Treasury yields had briefly touched a nine-month high in Europe on the mix of higher oil prices, good economic data and an unexpected move by the BOJ to trim its long-dated bond buys.
That stoked speculation it could start to wind down its stimulus policy this year and saw the yen rise as much as half a per cent to 112.50 yen to the dollar.
Since it adopted its yield-curve-control policy in 2016, the BOJ has occasionally tweaked its buying, but some market players seemed to take yesterday’s move as a signal of possible intent.
The dollar, meanwhile, was rising against most other major currencies including the euro, which having approached three-year highs last week slipped to a 10-day low of $1.1941.
That was despite the biggest increase in German industrial output since September 2009 and suggested investors might be becoming more cautious after a months-long rally that has pushed “long” euro positions to record levels.
Wall Street’s expected tick higher comes with the fourth-quarter earnings season there just beginning and investorswho are unashamedly upbeat.
Citi analysts say global earnings revisions have now been upgraded for 14 weeks in a row, the best run of weekly upgrades since their data series started in 2000.
Although high levels of earnings revisions are usually seen at the start or end of the economic/market cycle, they said “it is still too early to call the end of this cycle”.
Commodity markets are one of potential factors in that.
Oil prices jumped to their highest since mid-2015 yesterday amid Opec-led production cuts and a dip in American drilling.
Brent crude, the international benchmark, jetted as high as $68.29 a barrel, its highest since May 2015, with US WTI crude doing the same as it rose to $61.91.
Beyond equalling that 2015 high, which was a short intra-day spike, yesterday’s high was the strongest for WTI since December, 2014, at the start of the oil market slump.
Asian trading saw its own milestones. Japan’s Nikkei closed at its highest since November 1991, China chalked up an eighth day of gains and stocks in the Philippines jumped two per cent to a new all-time high.