MOSCOW, November 1 (RIA Novosti) — World stock markets sharply increased, with US shares reaching record highs, after the Bank of Japan unexpectedly announced further monetary easing Friday in an attempt to increase inflation.
The Bank of Japan announced yesterday that it will increase its monetary stimulus by roughly 60% in its next round of anti-deflationary measures aiming to achieve a 2% inflation target. This sudden move pushed forward stocks globally, from Asia-Pacific to the Americas. In the US, the BOJ easing has somewhat made up for this week’s ultimate wrap-up of the Fed’s quantitative easing program.
“Just as the Fed takes away the punch bowl, the BOJ has turned up with a crate of sake,” said Jonathan Sudaria of Capital Spreads as quoted by the Japan Times.
The Dow Jones Index added 1.13% to a record high of 17,390.52, exceeding its previous peak by roughly 100 points. The S&P500 climbed 1.17%, reaching 2,018.05%, which is slightly above its previous peak. Mainly tech-trading Nasdaq surged 1.41% to 4,630.74 which is highest since March 2000.
Several hours earlier, Asia-Pacific stocks closed on the rise as well as Japan’s Nikkei added 4.83%, Hong Kong’s Hang Seng rose 1.25% and ASX 200 surged 0.92%.
“The Japanese economy is now at a critical moment in its process of getting out of deflation. The [stimulus] measures this time show the Bank of Japan’s unwavering determination to exit deflation,” said the BOJ head yesterday as quoted by the Guardian, assuring markets that easy money policies in Japan were here to stay.
In Europe, a key index of top European shares, the FTSEurofirst 300, surged 1,8% to 1,351.96 points, is in line with Bloomberg’s European 500 Index’ rise of 1.82% o 229.67. During the past week, this pan-European index had its quickest expansion since December 2013. The European markets’ rise is particularly important now, as Eurozone recovery remains fragile and growth is still sluggish despite ECB’s easy monetary conditions.
"It's important for the world economic outlook in general," said Chris Rupkey of the Bank of Tokyo-Mitsubishi as quoted by the LA Times. “Everything seemed to be running off the rails in the mind of the markets,” which means the BOJ move has come in handy for the developed economies.
However, one of the main concerns of the global economic growth is getting worse. China’s manufacturing figures today showed a further slump in business activity amid a stalling real estate market and slowing investment. This year, the mainland’s economy has experienced its slowest growth rate since 1990.
The Chinese government announced its Purchasing Managers’ Index (PMI) in manufacturing slid to 50.8 in October from last month’s 51.1, Bloomberg reports. This figure’s value above 50 means growth, while below that indicates recession.
The BOJ’s easing has put mounting pressure on South Korea to also institute their own monetary easing policies. “If the yen continues to weaken, this will pose further downside risks to Korea’s exports,” Ronald Man of HSBC Holdings Plc in Hong Kong noted as reported by Bloomberg. “Lower export growth will weaken Korea’s economic outlook and, in turn, markets have naturally priced-in a higher probability of a rate cut.”