World stocks rally after Japanese stimulus

AFP , Friday 31 Oct 2014

Stock Exchange
Specialist Anthony Rinaldi, right, works at his post on the floor of the New York Stock Exchange, Friday, Oct. 31, 2014 (Photo: AP)

World stocks surged on Friday as the Bank of Japan's surprise stimulus sent investors on a buying spree.

Markets from Asia to Europe ended the week on a positive note, as the BOJ's decision countered the gloom earlier this week caused by the end of the Federal Reserve's massive monetary easing programme.

"Just as the Fed takes away the punch bowl, the BoJ has turned up with a crate of sake," said Capital Spreads dealer Jonathan Sudaria, pointing to diverging trends in monetary policies.

London's benchmark FTSE 100 index closed 1.28 percent up at 6,546.47 points, while in Paris, the CAC jumped 2.22 percent to 4,233.09 points and Frankfurt's Dax gained 2.33 percent to 9,326.87.

US markets were trading in record territory, with the Dow up 1.10 percent and Nasdaq rising 1.4 percent.

Markets across Asia also surged, led by Tokyo's Nikkei index, which leapt 4.83 percent to 16,413.76 points -- its highest level since November 2007.

However, the euro dived below $1.25 for the first time for more than two years, driven by speculation that the Fed could raise interest rates sooner than expected.

And with problems crowding in on the Russian economy, the ruble tumbled to another record low against the dollar despite aggressive action by the Russian central bank which ramped up its interest rate by 1.5 percentage points to 9.5 percent.

The BoJ boosted its vast monetary easing programme on Friday, in a unexpected move aimed at reviving growth.

It said it would add up to 20 trillion yen ($182 billion) to its current asset-buying scheme, bringing it to 80 trillion yen annually.

At Capital Economics, chief economist Julian Jessop said that "the Bank of Japan's announcement today ... is a timely reminder that not everyone has to follow the Fed".

This would be particularly the case "in the eurozone if expectations build that the ECB will follow with full-blown QE (stimulus) of its own. More evidence of the diverging prospects for monetary policy should also provide an additional boost to the dollar across the board".

The dollar pushed past 111 yen after the Japanese central bank acted, and after the United States released forecast-busting economic growth data.

At 1700 GMT, it was trading at 111.96 yen, sharply above Thursday's level of 109.22.

In company news, shares in French bank BNP Paribas jumped 3.46 percent to 50.14 euros in Paris, as it surprised investors with a 10.6-percent rise in third-quarter net profit to 1.5 billion euros.

And Royal Bank of Scotland (RBS) shares jumped 6.21 percent to 388 pence after the state-rescued lender revealed net profits rebounded to £896 million in the three months to September.

However, RBS also set aside £400 million for risks from global probes into alleged rigging of the foreign exchange market.

International Airlines Group was another big FTSE gainer, with shares up 4.74 percent at 409.2 pence on increased third-quarter profits.

In commodity deals on Friday, gold slumped to a four-year low, diving to $1,161.16 per ounce, on the back of the strong dollar.

Meanwhile, the Brent North Sea crude for delivery in December slid to $85.36 a barrel from $86.03 one week earlier, while the US benchmark West Texas Intermediate recoiled to $80.18 a barrel compared with $81.38 a week earlier.

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