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World equities get Japanese boost, yen lags

World stocks rose on Tuesday to buck weakness in parts of Europe after a fresh burst of stimulus from the Bank of Japan boosted the Nikkei and hit the yen.

That trend was set to continue in the US session, with stock futures there all pointing to small gains as traders return from a three-day weekend. Ten-year Treasuries, meanwhile, were down 1 basis point at 2.73 per cent.

The largesse from Tokyo, in the form of an expanded loan programme to Japan’s commercial banks, was partly offset overnight by action to rein in lending in China and hawkish rate-rise comments in Australia. The 3.1 per cent gain for Japan’s Nikkei contrasted with the rest of Asia and a 0.1 per cent dip in Europe as the FTSEurofirst 300 consolidated after rising in eight of the last nine sessions.

A weak reading of German investor sentiment — on concerns about a slowing in US economic momentum and uncertainty around the emerging markets outlook — gave no reason to recover lost ground, even though think tank ZEW cautioned against a too-pessimistic reaction to the data.

“Although uncertainties on the current recovery path remain elevated, we certainly see fewer risks than six months ago or so,” added Annalisa Piazza, market economist at Newedge Strategy in London.

The concern about some emerging market capital markets has not, however, stopped the MSCI World index from grinding back to within touching distance of the high hit prior to January’s emerging market-led selloff.

The index is now just 0.4 per cent off that peak, helped by a 0.2 per cent gain on Tuesday that was buoyed in turn by London-listed mining heavyweight BHP Billiton, which rose after forecast-beating results.

“I think on a valuation basis stocks still aren’t expensive,” said Matt Basi, head of sales trading at CMC Markets. “There’s still money parked on the sidelines waiting to do a bit of bargain hunting.”

Weighing that up against the weaker ZEW, German Bund futures rose 16 ticks on the day.

Greek bond yields, meanwhile, hovered around their lowest since the country’s debt restructuring as international lenders said they would return to Athens this week to assess the delivery of economic reforms.

The big loser from the BoJ action and subsequent bank-led Nikkei rally was the yen, which lost ground against all of its major currency peers, with the dollar gaining 0.6 per cent to trade just off its February high.

After initially weathering a bout of profit-taking, gold slid away from its near 3-1/2-month peak to hit a session low of $1,312.34 per ounce. More insight on the US Federal Reserve’s current thinking is likely on Wednesday, when it publishes the minutes of its last meeting.