March 18, 2011 / 12:42 AM / 6 years ago

JAPAN MARKETS-Shares jump, yen tumbles as G7 lends hand to Japan

 * G7 intervenes to restrain yen, riskier assets gain
 * Nikkei rises 2.7 pct on short-covering, weaker yen
 * Shares down 10 percent on the week, $350 bln lost
 * Dollar spikes more than 3 percent above 81 yen
 * Too many uncertainties for clear market outlook

 (Updates to close)	
 By Hideyuki Sano and Antoni Slodkowski	
 TOKYO, March 18 (Reuters) - Japanese shares jumped nearly 3
percent and the yen tumbled on Friday after the Group of Seven
agreed on rare joint intervention to curb the soaring currency
and calm markets jittery over Japan's nuclear power plant
crisis.	
 But the stock rally does not mean dramatic gyrations seen
this week are over because the crisis at the power plant is
still unfolding and the full impact of last Friday's devastating
earthquake and tsunami is not clear, dealers said.	
 The move by the G7 to support the country as Japan struggles
to cope with its biggest crisis since World War Two comes a day
after the yen soared to a record 76.25 in chaotic
trading.	
 The dollar rose more than 3 percent to around 81.75 yen
after the G7 announcement, which came just as the Tokyo stock
market opened.	
 "It was as clear as it could be and it was huge," said Imre
Speizer, a senior strategist at Westpac Bank in Wellington. 
"They said they will intervene and the whole world will
intervene. This is much bigger than earlier expected."  	
"This is huge and it's having commercial effect. There can be
a lot more upside in dollar/yen before the next 24 hours is
over. Global coordinated intervention is very rare, but when it
occurs it is usually very successful."	
 Equity markets elsewhere in Asia rose after the G7 bid to
stabilise global markets, with the MSCI ex-Japan index
 up 1.3 percent.	
 	
 The G7 decision following a teleconference surprised
markets. Investors had expected Bank of Japan to intervene to
rein in the rampant yen, but had not expected coordinated
central bank action by the world's wealthiest countries.	
 "This is the first coordinated intervention we have seen
since 2000, so it's going to have a very huge resonating effect
on the market," said Kathy Lien, director of currency research
at GFT in New York.	
 Traders said the Bank of Japan was immediately spotted
buying dollars. Media reports and traders said it is likely to
have bought more than $25 billion. 	
 The Nikkei share average rose 2.7 percent, but still
closed down around 10 percent on the week, which wiped $350
billion off the stock market.	
 The drop marked its biggest weekly slide since the 2008
global financial crisis. Trading volume was closer to normal on
Friday after the frantic trading earlier this week.	
 Japanese government bond futures were little
changed, while the spread on benchmark credit default swaps --
the cost of insuring against a sovereign default -- tightened.	
 Japanese stocks suffered their worst two-day slide on Monday
and Tuesday since the 1987 global stock market crash. That
followed a 9.0 magnitude earthquake and devastating tsunami on
Friday that killed thousands and crippled the Fukushima Daiichi
nuclear power complex about 240 km (150 miles) north of Tokyo.	
 Workers were struggling on Friday in the latest attempt to
cool overheating reactors and prevent further radiation leaks.	
 	
 LONG CORRECTION?	
 Shares of exporters, whose profits are eroded by a stronger
yen, were prominent among the gainers on Friday as the G7 pushed
the currency lower. Fujifilm rose 6.6 percent and
electronic firm Kyocera gained 5.2 percent.	
 But traders said much of the gains were from short-covering,
and the index may stall next week as investors wait to assess
the full economic and human cost of the quake and efforts to
prevent a catastrophic radiation leak from the Fukushima Daiichi
nuclear complex.	
 "The main things investors are worried about now are the
nuclear plant, the impact of the earthquake and tsunami on firms
and power cuts putting pressure on Japanese manufacturers," said
Norihiro Fujito, senior investment strategist at Mitsubishi UFJ
Morgan Stanley Securities in Tokyo.	
 Investors will be waiting for earnings figures and forecasts
in late April and early May for a better sense of how the triple
disaster will affect individual companies.	
 "This correction will be very long," said Tetsuro Ii, CEO of
Commons Asset Management.	
 "We have the nuclear problems and impact of the quake on the
economy, which is still hard to assess. I can't see the index
bouncing back quickly to levels from before the quake."	
 	
 "NERVOUS BATTLE"	
 The yen's surge had initially been prompted by expectations
insurance companies and other firms would repatriate funds to
meet the massive reconstruction costs of the disaster.	
 The move was exacerbated when a wave of stop-losses and
options-related selling kicked in, propelling the yen past its
previous record of 79.75 per dollar that occurred in the wake of
the 1995 Kobe earthquake.	
 Traders said the yen's retreat beyond 81 yen on Friday would
put pressure on investors to unwind long yen positions.	
 But others doubted the longer-term effectiveness of
intervention, given the past experiences of the Bank of Japan
and Swiss National Bank.	
 "It looks like we'll see a nervous battle between the BOJ
and the speculators," Norihiro Fujito, senior investment
strategist at Mitsubishi UFJ Morgan Stanley Securities.	
 "Hedge funds have expanded their asset holdings to
unprecedented levels, so even if it's a coordinated
intervention, effectively it may be similar to one-country
intervention. So looking mid- long-term, I'm not sure if they'll
be able to curb it."	
 Benchmark Japanese government 10-year bond futures 
fell early on, but recovered to close up 0.04 point to 139.74,
while the 10-year yield on the cash bond edged up
1 basis point to 1.210 percent.	
 "The crisis is pouring cold water on the Japanese economy.
Personal consumption will be weighed by concerns over
electricity shortages," said Nobuto Yamazaki, executive fund
manager at DIAM Asset Management.	
 "Given such an environment, we can't expect a so-called
'good yield rise' in the near future. What would push up the
yield of JGBs would be a worsening of Japan's fiscal
positioning."	
 Benchmark five-year credit default swaps 
tightened around 10 basis points to about 110 basis points.	
	
 (Additional reporting by Masayuki Kitano in Singapore, Akiko
Takeda in Tokyo and Wayne Cole and Ian Chua in Sydney; Writing
by Alex Richardson; Editing by Neil Fullick)	
 

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