Bank Of Japan Policy Boosts Indices
US stock futures opened with gusto Friday morning as the Bank of Japan unexpectedly expanded economic stimulus.
Saturday, November 1, 2014 - 00:00
While stock futures do not necessarily reflect intraday moves on Wall Street, analysts expect a strong showing for US indices.
S&P 500 futures opened 1% higher, Dow futures gained 1.1% and Nasdaq futures added 1.4%.
Bank of Japan increases monetary easing
In a surprising move, the Bank of Japan policy board voted 5-4 to boost the bank’s asset purchases to 80 trillion yen from a prior range of 60 to 70 trillion yen, MarketWatch reported. The bank increased its stimulus in an effort to stave off falling inflation rates.
“The US sends 4.5% of it exports to Japan, and so any action that can: (a) ward off the threat of deflation and the crippling effect that has on consumer expenditure; (b) give a boost to the Japanese economy, which is the world’s third largest, has to be seen as a strong positive for future earnings potential,” Stephen Pope, managing partner at Spotlight Ideas, told MarketWatch.
Indices benefit from Bank of Japan move
After the Bank of Japan announced its new policy, the yen dropped and Japanese stocks jumped, according to The Wall Street Journal. The Nikkei Stock Average added 4.8% to 16,413.76 – the highest mark in almost seven years. The advance was also the biggest single-session move in over a year.
Additionally, Japan’s $1.2 trillion Government Pension Investment Fund reported it would decrease its allocation for domestic bonds from almost 60% to 35% over time.
Stocks across the region advanced. Hong Kong’s Hang Seng Index gained 1.3%, Australia’s S&P/ASX 200 added 0.9% and the Shanghai Composite index rose 1.2% to a 20-month high.
The US Commerce Department also helped strengthen domestic stocks with its Thursday assertion that US economic growth grew at a higher rate than expected in the third quarter – 3.5% over analysts’ forecast 3.0%.
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