Thursday, 18 August 2016

US and Japanese stocks rise but BoJ reaching limits of bond-buying

Markets were mixed on Wednesday.

In the US, the S&P 500 rose 0.2 percent and the 10-year Treasury yield fell three basis points after minutes of the Federal Reserve’s last meeting showed that officials saw little risk of a sharp rise in inflation.

West Texas Intermediate crude rose for a fifth day, gaining 0.5 percent.

In Europe, the STOXX Europe 600 fell 0.8 percent.

In Asia, the Shanghai Composite was flat but the Nikkei 225 rose 0.9 percent as the yen halted its rally.

While investors on Wednesday welcomed the dovish turn in prospects for US monetary policy, there appears less scope for a more dovish Japanese monetary policy. According to a Bloomberg report, Japan’s biggest banks are running out of room to sell their government bond holdings.

“Banks are the first port of call” as the BOJ seeks to boost its JGB holdings by 80 trillion yen annually, said Shuichi Ohsaki, the chief rates strategist at Bank of America Merrill Lynch in Tokyo. “But they’re losing capacity to cut beyond those that are reaching maturity.”

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