GLOBAL MARKETS-BoJ bond buying sinks yen but shares, oil recover

Last Updated: Mon, Apr 08, 2013 12:30 hrs

* Yen touches multi-year lows vs dollar and euro

* Nikkei index soars to highest since August 2008

* World stocks stage recovery from Friday's selloff

* Oil jumps $1 a barrel but stays near 8-mth lows

By Richard Hubbard

LONDON, April 8 (Reuters) - The yen tumbled against the dollar and euro on Monday as the Bank of Japan began its boldest economic boost yet and the new liquidity lifted share and oil prices off lows hit last week on concerns over global growth.

The dollar gained 1.5 percent to sweep past 99 yen at one point and the euro touched a three-year peak of 128.44 yen after the BoJ conducted its first bond purchases since announcing the new monetary easing steps last week.

"The speed with which we've come through from 95 to 99 (yen) is absolutely astonishing. How much further we go beyond that, who knows?" said Simon Derrick, chief currency strategist at BNY Mellon Corp.

The dollar eventually settled around 98.67 yen for a gain of 1.2 percent from Friday's New York close, and the euro added 1.25 percent to trade at about 128.35 yen.

Since new BoJ Governor Haruhiko Kuroda promised on Thursday to inject about $1.4 trillion into the economy in less than two years, the yen has fallen more than 6 percent against both the dollar and the euro, while Japanese stocks have soared

Japan's Nikkei stock average jumped as much as 3.1 percent on Monday to its highest level since August 2008.

"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 BOJ has said 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.

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.

U.S. Treasury 10-year note yields fell sharply last week in response to the new BoJ policy and edged up just 1 basis point on Monday to 1.72 percent as some traders booked profits.

In Europe the main beneficiary was French debt with 10-year bond yields hitting a record low at 1.71 percent although German bonds were little changed.

A broader hunt for yield among investors also gave Spanish and Italian government bonds a boost. Spanish 10-year bond yields fell 8 basis points to 4.7 percent and the Italian equivalent eased 11 bps to 4.3 percent.

However, Portuguese bonds bucked the trend after a constitutional court on Friday rejected four out of nine austerity measures in the government's latest budget, undermining its efforts to meet the terms of a bailout deal.

The Portuguese 10-year bond yield gained one bp to 6.4 percent.


Share markets staged a recovery from the lows hit on Friday when U.S. jobs data sparked fears that the recovery in the world's biggest economy was losing momentum.

The red flag sent up by the weak employment data makes the path to further gains less secure, although it has lifted hopes the Federal Reserve will maintain its current aggressive monetary policy easing policies for longer.

MSCI's world equity index rose 0.25 percent to around 358 points on the day after registering its worst week of the year on Friday with a five-day loss of 1.26 percent.

U.S. stocks, which had their worst day of the year on Friday after the payrolls report, were expected to open higher when Wall Street reopened with the focus on first-quarter corporate earnings.

Earnings season begins with aluminium producer Alcoa, while major banks JPMorgan Chase & Co and Wells Fargo & Co are due to report on Friday.

Overall, S&P 500 earnings are expected to have risen 1.5 percent in the last quarter, down from a 4.3 percent gain forecast at the start of the year, according to Thomson Reuters data.

In Europe, German industrial output figures for the first two months of the year extended a weak run of data from the region for the first quarter which has prompted a European Central Bank hint at further policy easing.

"We will see ECB rate cuts next month," said Nick Beecroft, senior market analyst at Saxo Capital Markets.

The FTSEurofirst 300 index of top European shares was up 0.4 percent by midday, with London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX all up 0.3 to 0.7 percent.


Oil prices staged a similar recovery to equities, rebounding more than $1 per barrel, having hit eight-month lows at the end of last week fuelled by the worries over global economic growth.

However, oil is expected to trade in a tight range this week before a spate of economic data from China that will throw light on the pace of recovery in the world's second-biggest oil consumer and on its monetary policy.

"The oil markets are currently enjoying the support of upcoming liquidity after the BoJ announcement last week, but they are still digesting the disappointing jobs data from the U.S.," said Ker Chung Yang, senior investment analyst at Phillip Futures in Singapore.

Brent crude rose $1.23 per barrel to a high of $105.35 before settling around $105. U.S. crude rose 75 cents to $93.45 a barrel after logging its biggest weekly loss in more than six months last week.

A rise in Chinese steel futures to their highest in more than a week in anticipation of improving demand in the world's second biggest economy during the second quarter supported other industrial commodities like copper and iron ore.

Three-month copper on the London Metal Exchange climbed 1.25 percent to $7,500 a tonne, up from an eight-month low of $7,331.25 hit last week. The metal is still down more than 3 percent over the past three weeks.

Benchmark iron ore with 62 percent iron content for immediate delivery to China was steady at $135.90 a tonne.

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