Nikkei leads global sell-off after Bank of Japan inaction

AP News
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Posted: Apr 28, 2016 8:08 AM
Nikkei leads global sell-off after Bank of Japan inaction

HONG KONG (AP) — Japanese stocks led a global sell-off Thursday after the country's central bank dashed investors' hopes for more stimulus. The yen was also in the spotlight, surging by 3 percent against the dollar in the wake of the inaction from the Bank of Japan.

KEEPING SCORE: After a dramatic 3.6 percent fall in Japan's main stock index, European shares have all recorded hefty losses. The FTSE 100 index of leading British shares was down 1.1 percent at 6,252 while the CAC-40 in France fell 1.5 percent to 4,493. Germany's DAX was 1.3 percent lower at 10,171. Wall Street was poised to join the selling fray, with Dow futures and the broader S&P 500 futures down 0.8 percent.

JAPAN POLICY: Investors were disappointed by the Bank of Japan's decision not to add to its huge economic stimulus program, though it did give some extra relief for earthquake recovery programs. Hopes for more stimulus for Asia's No. 2 economy rose after the latest official figures revealed weak inflation and consumer spending for March even as factory output climbed.

MARKET INSIGHT: "This shows that too much expectation of further easing had been priced in and the BoJ has surprised the market by taking no action," Margaret Yang, an analyst at CMC Markets in Singapore, said in a commentary. "It is probable that the central bank is temporarily running out of tools to stimulate the economy, or they need more time to observe and assess the impact of negative interest rates."

JAPANESE MARKETS: Following the BoJ announcement, Japan's benchmark Nikkei 225 index erased earlier gains and slid 3.6 percent to 16,666.05. The yen's appreciation in the wake of the decision was largely behind the fall as it makes life more difficult for the country's exporters. The dollar was down 3 percent at 108.16 yen.

FED ON HOLD: Earlier, the U.S. central bank offered few surprises for investors in its latest policy statement, saying it would keep a key interest rate unchanged while revealing no clues as to when its next rate hike might occur. The Fed said that the United States is seeing solid job gains while noting economic activity appears to be slowing and expressed less alarm about the global economy than it had at its previous meeting in March.

ASIAN SCORECARD: South Korea's Kospi shed 0.7 percent to 2,000.93 while Hong Kong's Hang Seng index eked out a 0.1 percent gain to 21,388.03. The Shanghai Composite Index in mainland China lost 0.3 percent to 2,945.59 and Australia's S&P/ASX 200 added 0.7 percent to 5,225.40.

ENERGY: Benchmark U.S. crude oil fell hovered at its highest level this year, rising 3 cents to $45.36 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.29, or 2.9 percent, to settle at $45.33 a barrel on Wednesday, which was its highest price since December. Brent crude, the international standard, lost 13 cents to $47.05 a barrel in London.