Stocks and bonds collapsed as Bank Of Japan’s surprise policy shift spooks investors.
  • December 22, 2022
  • Team Hongkong Journalist
  • 0


What it covers is…
Global stocks and bonds sank on Wednesday as a surprise policy twist by Japan’s central bank flustered the investors who were already worried about the economic outgrowth of an increase in interest rates and raised domestic bonds to seven-year highs.

Lately, the European stock market hit six-week lows, with the German and French benchmark indices declining by 1%, while London’s FTSE 100 forfeited as much as 0.8%.

Japan’s 10-year government bond yields streamed to their highest since 2014, with euro-zone yields following suit. “Yields rise when bond prices decline.”

Expertise of the professionals on the market

James Rossiter, head of Global Macro strategy at TD Securities, said, “There have got to be a lot of people on holiday saying, ‘wait, this wasn’t supposed to happen’.”

Rossiter also pointed to BOJ Governor Haruhiko Kuroda’s speech in which he said the policy twist was “aimed at improving market functions” and was “not an interest rate hike.”

“That is not the market has taken this.” “A thin line of liquidity in the market might be playing with the size of price movements,” Rossiter added.

However, others took participation in the BOJs decision as an indicator that the force that flocked the Yen hit the lowest of 3 decades against the US dollar; it may begin to revolve this year.

Further, Kerry Craig, the global market strategist of JPMorgan Asset Management, said, “While there is still a wide gap, the hint that the BOJ is moving incrementally away from the ultra-loose policy should be yen positive in the near term.”

The Final verdict

The Bank of Japan has regularly acquired billions of dollars worth of government bonds to keep long-term interest rates low in spite of a rise in inflation; allowing yields to move in a broader band could attract new cashback to Japan and boost the Yen, analysts mentioned.

Later, the policy decision caused an instant hike in the Yen, with the dollar index decreasing from 0.80% to 103.95 to a six-month low. This hammered other currencies, with the profit from both pound and euro falling by more than 3.5% against the Yen.

On the other hand, the Nikkei benchmark index collapsed 2.71% while trading in a positive state earlier in the day. In comparison, US futures stock tumbled between 0.1-0.2 %, recommending a modestly slower start towards trading later.

Meanwhile, the reopening of China’s stock market to the rest of the world after nearly three years of COVID lockdowns persisted as a point of focus for investors. As a result, credit Suisse on Monday upgraded its outlook from neutral to surpass China’s stock markets in the year ahead.
Suresh Tantia, the Senior investment strategist at Credit Suisse, said, “The whole narrative of China has changed, it’s gone from COVID zero that was putting the economy under pressure, and there’s now an intention to move towards a reopening.” “And as it takes place, we will see a recovery in China’s market and economy,” he concluded.

- Published By Team Hongkong Journalist

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