Featured # Markets | 2 years ago

Financials Spike Global Stocks, Sterling Drops on BoE Decision

Global shares rose in the previous session, mostly aided by financial stocks, while sterling fell against the dollar. This is before the Bank of England (BoE) policy meeting expected to deliver interest rate cuts, their first since 2009. The U.S. dollar strengthened against a majority of the greenback, including the yen. this is after private sector employment data led to increased expectations that the Federal Reserve might still raise their interest rates this year. Sterling shed 0.3 percent to trade at $1.3290 before the BoE’s policy decision at 1100 GMT. Many other markets, however, remained focused on the monthly U.S. jobs report, which is due on Friday.

The BoE is forecasted to cut their main interest rate by a quarter percentage, hitting a record low of 0.25 percent, in order to cope with the large possibility of a recession after June’s vote to exit the European Union. Many economists also believe the BoE will resume their purchases of government bonds; which analysts think will intervene on the pound’s success.

“I think a cut plus 100 billion pounds in new quantitative easing is probably the barrier (to more falls),” said co-head of portfolio investment Richard Benson, of London’s currency fund Millennium Global.

MSCI’s broadest index of Asian-Pacific shares outside of Japan grew by 0.5 percent, led be a strong gain in resource shares. Tokyo saw an increase of 1.1 percent, as strong gains rolled in from financials and with news of a weaker yen. The dollar index, .DXY, rose 0.1 percent against a basket of major currencies. The yen fell by 0.1 percent to 101.33 per dollar JPY= and the euro EUO= fell similarly to trade around $1.1138. The yen has risen by 4 percent since Friday when the Bank of Japan’s monetary easing steps fell short of expert’s forecasts.

The government unveiled a fiscal stimulus package on Tuesdays, which led some experts to believe that Japan is looking to rely less on its monetary policy, in order to revive the economy. This would give the yen a much-needed lift, sending Japanese bond yields soaring to three-year highs.

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