Saturday, 6 April 2013

Yen at risk of rout but Japanese stocks rise amid falls elsewhere

The Bank of Japan's latest moves to stimulate the economy are being met with some skepticism. From Bloomberg:

Billionaire investor George Soros and Bill Gross, who runs the world’s biggest bond fund, said the Bank of Japan plan to end deflation risks weakening the yen.

“If the yen starts to fall, which it has done, and people in Japan realize that it’s liable to continue and want to put their money abroad, then the fall may become like an avalanche,” Soros said today in an interview on CNBC...

Kuroda may have difficulty achieving his inflation goal, Gross said. Group of Seven nations may press Japan to control the pace of the yen’s decline to temper gains in their own currencies, he said...

Nevertheless, in early reaction to the BoJ move, Japanese stocks started strongly on Friday, the Nikkei 225 surging more than four per cent in early trade to its highest level since August 2008. However, it ended the day just 1.6 percent higher.

Other Asian markets mostly closed lower, with South Korean stocks losing 1.6 percent amid tension with North Korea and Hong Kong stocks tumbling 2.7 percent after news of deaths from bird flu in China.

The weakness carried over into the European and US sessions. The STOXX Europe 600 fell 1.6 percent, its biggest drop since October. The S&P 500 initially fell 1.3 percent following a weak US jobs report but recovered later to end the day just 0.4 percent lower.

Among economic data on Friday, the US employment report was the highlight of the day. The weak growth of 88,000 payrolls in March initially drove markets down, although the unemployment rate did fall to 7.6 from 7.7 percent in February as the labour force shrank.

Encouragingly for the US economy, another report on Friday showed that the trade deficit narrowed in February as exports rose 0.8 percent while imports were little changed.

There were also positive data from Japan on Friday. A preliminary reading of the index of coincident economic indicators showed a rise of 0.5 point in February. The index of leading economic indicators rose 2.5 points.

Economic data from Europe on Friday were mixed. Retail sales in the euro area fell 0.3 percent in February. This followed a 0.9 percent increase in January. Moving in the opposite direction, German factory orders jumped 2.3 percent in February after having fallen 1.6 percent in January.

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