Global stocks clinched onto a nine-month high Monday after G20 finance executives said that they would use “all policy tools” to lift worldwide economic growth. These signals helped boost European stocks over 0.5 percent, as takeover activity, which also continued in the UK gambling sector. Oil prices for LCOc1 held back commodity firms. Wall street was predicted to open the week flat, however, opened slightly lower due to last week’s record highs which are keeping traders cautious for the next couple of days. As the weekend’s signals from the G20 meeting in China are welcome, investors are still anticipating a hectic week, due to the U.S. Federal Reserve meeting, European bank stress tests, and yet another super sized stimulus from Japan.
“I think everyone is range-trading at the moment and just waiting to see what the direction is,” said Richard Kelly, head of global research at TD Securities. “The Bank of Japan is really the one that is front and center this time with all talk around ‘helicopter money’. If they disappoint, which I think is probably more likely, then we are likely to see risk assets coming off.”
Bank of Japan chief Haruhiko Kuroda said that there is a chance he could ease the policy further, however, he also added that the discussion over “helicopter money” had closed. The yen has recently lost ground against the dollar, even though at 106.30 yen, it is close to a six-week low. The dollar’s index against the greenback was around 97.371, after hitting a 4-1/2 month high of 97.543 on Friday.
“Dollar/yen could test the 108 handle if the Fed’s comments this week are supportive toward a rate hike and if the BOJ eases,” said FPG Securities Koji Fukaya, of Tokyo. “On the other hand, the pair could drop below 105 if the BOJ stands pat as easing expectations are well entrenched.”