By Vivek Kumar
Moving markets today: Japanese stocks volatile as Bank of Japan ends negative rates, yen falls; Australia’s central bank holds rates; focus shifts to US Federal Reserve and Bank of England policy decisions
Wall Street’s major indices ended on a positive note, buoyed by a resurgence in large-cap tech stocks like Alphabet and Tesla, which led to a rebound in the Nasdaq. The yen depreciated, and Japan’s Nikkei index experienced fluctuations, swinging between slight gains and losses after the Bank of Japan announced the termination of its prolonged stimulus measures. Australia’s central bank kept interest rates steady at 4.35 per cent, aligning with market expectations. This week, investors are keeping a close watch on domestic inflation reports due Wednesday and the Bank of England’s monetary policy decision expected Thursday, with most economists forecasting no changes to interest rates. Additionally, all eyes are on the U.S. Federal Reserve’s interest rate announcement on Wednesday, attracting global attention. Here are five key takeaways for your day.
BOJ’s bombshell: negative rate policy scrapped
The Bank of Japan (BOJ) has delivered a seismic announcement, slamming the brakes on its negative interest rate policy—a bold departure from its long-standing stimulus measures. This historic move marks Japan’s first interest rate hike since the distant echoes of 2007.
BOJ Governor Kazuo Ueda is poised to take the podium today at 0630 GMT, shedding light on this monumental decision. The negative interest rate policy, which levied a 0.1 per cent charge on a privileged few financial institutions’ excess reserves parked at the central bank, has loomed large since its inception in 2016, Reuters reported.
With inflation reigning above the BOJ’s 2 per cent target for an unprecedented stretch, the writing has been on the wall. Market pundits had long anticipated the central bank’s inevitable pivot from its loose monetary stance, and the time has come for action, expectedly in March or April.
Reserve Bank of Australia keeps rates steady as anticipated
The Reserve Bank of Australia (RBA) decided to keep interest rates unchanged on Tuesday and hinted at a less aggressive approach to tightening monetary policy. This suggests a growing belief that inflation is on track to meet its target despite a slowing economy. Following its two-day March policy meeting, the RBA maintained the interest rate at 4.35 per cent, which has remained unchanged for the third consecutive meeting.
Oil prices slide as Russia ramps up supply
Oil prices dipped slightly following gains in the previous trading session, partly attributed to expectations of increased supply from Russia. The Brent crude oil futures contract for May delivery edged down by 16 cents to $86.73 per barrel, while the U.S. West Texas Intermediate (WTI) contract slipped by 13 cents to $82.03. Furthermore, the WTI April contract, set to expire tomorrow, experienced a decrease of 16 cents to $82.56, Reuters reported.
Both benchmarks had recently reached their highest levels in four months, supported by reduced crude exports from Saudi Arabia and Iraq. Additionally, indications of stronger demand and economic growth in China and the U.S. further bolstered the prices in the previous session.
What’s coming up
The spotlight will be on major central banks like the US Federal Reserve and the Bank of England, along with updates from several other countries including China, Switzerland, Indonesia, Norway, Turkey, Taiwan, Russia, Brazil, and Mexico.
While it’s widely expected that the Fed will keep interest rates unchanged during its March 19-20 meeting, investors will be paying close attention to Chair Powell’s remarks and the Fed’s dot-plot, which maps out the anticipated future path of interest rates.
Meanwhile, the Bank of England is projected to maintain rates at 5.25 per cent next Thursday, with market forecasts indicating a slower pace of rate adjustments compared to the European Central Bank and the Federal Reserve throughout the year.
Besides central bank decisions, there will be a slew of economic data releases, including UK inflation numbers, purchasing managers’ index data from G7 nations and India, as well as US home sales statistics.
Japan stocks experience volatility, yen weakened by BOJ stimulus exit
The Dow Jones Industrial Average saw a modest increase of 0.20 per cent, reaching 38,790.43 points, while the S&P 500 rose by 0.63 per cent to hit 5,149.42 points, and the Nasdaq Composite rebounded with a gain of 0.82 per cent, reaching 16,103.45 points, breaking a streak of three consecutive days of losses.
In Asia, the Nikkei 225 experienced a decline of 0.36 per cent, settling at 39,598.27 points, initially extending its morning trading losses before reversing course to show slight gains. Chinese stocks also faced downward pressure, with Hong Kong’s Hang Seng index dropping by over 1 per cent, and the blue-chip shares CSI300 easing by 0.3 per cent. The dollar strengthened by 0.35 per cent against the yen to reach 149.67 yen as traders sold off the Japanese currency, already anticipating the decision.
Rising yields contributed to the dollar’s momentum, pushing its index to a two-week high of 103.67. Meanwhile, spot gold traded at $2,160.51 per ounce in the commodities market.
