GLOBAL MARKETS-Yen drops on BoJ easing, U.S. shares rise

Thu Apr 4, 2013 11:56am EDT

* Yen sinks 3.3 pct vs dollar on bold Bank of Japan easing

* Dow, S&P 500 slightly higher, pare initial gains

* Oil falls on U.S. new jobless claims, bonds rally

By Herbert Lash

NEW YORK, April 4 (Reuters) - The yen sank on Thursday after the Bank of Japan unveiled a bold plan to pump money into the economy, pushing the dollar higher, while U.S. stocks rose as investors were reassured that central bank policies remain supportive of equities.

Wall Street shrugged off data showing the number of Americans filing new claims for unemployment benefits hit a four-month high last week, in a possible sign the U.S. labor market recovery lost some steam in March.

The BoJ surprised markets when it unleashed the world's most intense burst of monetary stimulus, planning to nearly double the monetary base to 270 trillion yen ($2.9 trillion) by the end of 2014, in a shock therapy to end two decades of stagnation.

The dollar and euro soared more than 3 percent against the yen in their biggest one-day moves since 2008 after the BoJ took the action to fight deflation.

"The Japanese news was significant to show that there is going to continue to be, on a global basis, easy money, which supports stocks," said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.

The dollar rose as high as 96.41 yen, approaching a 3-1/2-year peak of 96.71 set on March 12. It was last trading at 96.20 yen, up 3.4 percent on the day and on track for its best day since October 2008.

The euro soared 3.46 percent to 123.64 yen, the biggest one-day move since November 2008.

Investors were inclined to buy stocks on the dips, a pattern that will likely be repeated until more important fundamental news is released, Meckler said. U.S. stocks fell about 1 percent on Wednesday in the biggest sell-off since late February.

Peter Cardillo, chief market economist at Rockwell Global Capital in New York, said the rise in jobless claims was an indication that the sequester was taking a toll on the labor market.

"The economy is slowing, the job market is slowing, and the Fed is not changing its policy," Cardillo said.

Initial claims for state unemployment benefits increased 28,000 to a seasonally adjusted 385,000 last week, the highest level since November, the Labor Department said.

European shares fell sharply as traders, unhappy by the lack of fresh economic stimulus measures from the European Central Bank, took profit on recent sectoral outperformers.

The ECB kept its interest rates on hold and did not unveil any new initiative, such as special credit schemes for small enterprises, which some traders had been hoping for after recent weak economic data.

The pan-European FTSEurofirst 300 index extended losses after ECB President Mario Draghi spoke in the afternoon, to end almost 1 percent lower at a provisional 1,181.88.

MSCI's world equity index slipped 0.35 percent to 356.42.

U.S. Treasury debt prices rose, pushing yields to near 3-1/2-month lows, after the jobless claims data suggested that the government's monthly employment report due out on Friday could show the labor market lost some steam in March, an outcome that would favor safe-haven U.S. debt.

The benchmark 10-year U.S. Treasury note was up 10/32 in price to yield 1.7814 percent.

Crude oil futures dropped as the increase in U.S. claims for unemployment benefits heightened concerns about economic growth in the world's top oil consumer.

Brent futures for May delivery fell $1.22 to $105.89 a barrel.

U.S. crude slumped $1.74 to $92.71 a barrel.

Spot gold prices fell $9.94 to $1,547.40 an ounce.

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