Bank of Japan bond buying pressures yen; U.S. stocks rise

NEW YORK Mon Apr 8, 2013 6:42pm EDT

1 of 5. Traders work on the floor at the New York Stock Exchange, April 1, 2013.

Credit: Reuters/Brendan McDermid

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NEW YORK (Reuters) - The yen dropped for a third straight day against the dollar and the euro on Monday as the Bank of Japan began aggressive monetary easing in an attempt to beat persistent deflation, boosting stocks in most markets, with U.S. stocks gaining ahead of an earnings season expected to show modest growth.

The dollar rallied against the yen to its highest level since May 2009, above 99 yen, and the euro touched a three-year peak against the Japanese currency after the BoJ conducted its first bond purchases since announcing the new monetary easing steps last week.

Wall Street dipped in early trading as caution ahead of the beginning of the quarterly earnings season dominated sentiment, but stocks turned up moving into the close.

Earnings forecasts have been scaled back heading into the first-quarter reports, which kick off this week. S&P 500 earnings are expected to have risen just 1.6 percent from a year ago, according to Thomson Reuters data, down from a 4.3 percent forecast in January.

Stocks have rallied strongly this year with major indexes hitting record highs.

"We're waiting for earnings for evidence that the market can be supported at these levels," said Jim Dunigan, chief investment officer at PNC Wealth Management in Philadelphia. "We will see growth in earnings, but clearing the expectations bar could be difficult, which could give us reason to pause."

The Dow Jones industrial average .DJI was up 47.31 points, or 0.32 percent, at 14,612.56. The Standard & Poor's 500 Index .SPX was up 9.66 points, or 0.62 percent, at 1,562.94. The Nasdaq Composite Index .IXIC was up 18.41 points, or 0.57 percent, at 3,222.26.

Among the day's most active names, Advanced Micro Devices (AMD.N) jumped 13 percent to $2.59 and was the S&P 500's biggest percentage gainer.


In Tokyo, Japan's Nikkei share average .N225 jumped as much as 3.1 percent on Monday to its highest level since August 2008, following the promise by BoJ Governor Haruhiko Kuroda on Thursday to inject about $1.4 trillion into the economy in less than two years. Since then the yen has fallen more than 6 percent against both the dollar and the euro, while Japanese stocks have soared

"The BoJ's bazooka has sparked the buying of Japanese stocks, especially domestic sectors like real estate," said Yasuo Sakuma, a portfolio manager at Bayview Asset Management.

The dollar traded at 99.32 yen, up 1.5 percent, while the euro added 1.9 percent to trade at about 129.13 yen.

"Barring any sudden spike in risk aversion, (dollar/yen) is likely to roll through that (100) level as momentum remains relentless for the time being," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.

The BoJ has said it would buy 1 trillion yen ($10 billion) of government bonds with maturities between five and 10 years, and 200 billion yen of bonds with maturities exceeding 10 years.

MSCI's world equity index .MIWD00000PUS rose 0.4 percent to 356.91 after registering its worst week of the year on Friday with a five-day loss of 1.26 percent.

Last week, the S&P 500 posted its largest weekly decline this year. Even so, the S&P 500 is up nearly 9 percent for the year so far, while the Dow has gained just under 11 percent.

European shares rose, led higher by the healthcare sector, as investors tiptoed back into the market, after a sharp drop on Friday on the weak U.S. jobs figures. Traders noted a lack of conviction on Monday -- evidenced by low volumes -- with some investors apprehensive before the start of the U.S. earnings season.

The FTSEurofirst 300 .FTEU3 closed up 0.2 percent at 1,164.79 points. The euro zone's blue-chip Euro STOXX 50 .STOXX50E advanced 0.2 percent to 2,589.25 points.

The prospect that Japanese investors will move out of the domestic debt market due to the heavy central bank buying has boosted the attractiveness of some European debt and demand for U.S. Treasuries.

The U.S. Treasury 10-year note yield fell sharply last week in response to the new BoJ policy, but edged up on Monday to 1.748 percent as some traders booked profits and dealers prepared for this week's auctions of $66 billion in longer-dated Treasury debt.

In Europe the main beneficiary was French debt with 10-year bond yields hitting a record low.



Asset returns in 2013:


Oil prices were mostly higher, after hitting eight-month lows on Friday on worries over global economic growth.

Brent crude rose to a high of $105.55 before trading around $104.95, up 0.6 percent. U.S. crude rose 86 cents to $93.55 a barrel after logging its biggest weekly loss in more than six months last week. <O/R>

(Reporting by Nick Olivari in New York; Editing by Leslie Adler)

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Comments (3)
Umedia wrote:
Yippee! Japan is printing dollars too! We’ll all be rich soon!

Apr 07, 2013 11:50pm EDT  --  Report as abuse
ttolstoy wrote:
“”People are really pulling funds out of gold for better investments such as equities and real estate in emerging economies,” said Joyce Liu, investment analyst at Phillip Futures.”

This type of analysis characterizes the complete lack of understanding of the market that so many market participants are afflicted with. No one is “pulling funds out of gold”. People are being stopped out and “margin called” out of gold because the banking cartel has been attacking the price in order to reduce the cost of escaping from short positions. Over the last week or so, the cartel has also been the beneficiary of a foolish US government, which provided some guarantees against loss by gold manipulators, in preparation for the bad economic news that has already been released, and, I suspect, even worse news of some kind, about to be released soon. Some of the overleveraged hedge funds have responded by panic selling GLD.

Statistics from the US Census Bureau (FT900 reports) show that US exports of gold, over the past 12 years, have exceeded the US mining supply plus the highest estimate of recycling supply by 4,500 tons. Where did that gold come from? The only possible source is the basement of the NY Fed, which claims to hold 8100 tons of foreign-owned gold. In order to sell that gold into the market, swap liens have been placed on physically untouched bars of US owned gold in repositories at Fort Knox, West Point and the Denver Mint. That’s why the US Treasury lists the gold reserve as “gold and gold swaps” and steadfastly refuses to disclose what those “swaps” are all about, even in the face of freedom of information act requests.

In short, the US now owns ONLY 3800 tons of unencumbered gold bars, and, at a current export rate of about 247 tons per month (Jan. 2013), that is not going to last very long. The downward manipulation of gold prices is at an end, and, now, the Fed is selling gold solely to support its casino banks as they escape from short positions, and the resulting price reductions increase physical demand. Once the process runs its course, gold is going to move upward to the sky, and take related precious metals, such as silver and platinum along with it.

Apr 08, 2013 2:50am EDT  --  Report as abuse
Arnoldbosnan2 wrote:
All I can say if you purchase Japanese products, when Yen depreciate, the product will depreciate along. Can you imagine, buying 1 million Yen of Japanese product Dec 2012 and the product have depreciate 30% not include the product depreciate by itself. Value of the product become 700,000 Yen.

Apr 08, 2013 11:41am EDT  --  Report as abuse
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