Global stocks scale record highs as U.S. government shutdown ends, yen turns down

Asian stocks advanced on Tuesday after U.S. senators struck a deal to end a government shutdown in a boost to Wall Street, while the dollar turned higher against the yen after Bank Of Japan’s chief reiterated his support for quantitative easing.

Spreadbetters expected Britain’s FTSE .FTSE to open 0.3 percent higher, Germany’s DAX .GDAXI 0.5 percent and France’s CAC .FCHI 0.3 percent.

U.S. lawmakers passed a short-term measure on Monday to fund the federal government through Feb. 8.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.9 percent to a record peak.

Australian stocks climbed 0.75 percent and South Korea’s KOSPI .KS11 added 1.4 percent.

Japan’s Nikkei .N225 rose to a 26-year peak, Hong Kong’s Hang Sang .HSI scaled a record high and Singapore .STI reached a 10-year top.

World equity markets have been on a tear over the past year, buoyed by a synchronized uptick in global economic growth in a boon to corporate profits and stock valuations.

The brief U.S. government shutdown put only a minor dent to equities, with Wall Street rallying to all-time highs overnight following the deal to end the impasse in Washington. [.N]

In currencies, the dollar briefly dipped 0.33 percent to 110.550 yen JPY= after the BOJ maintained its short-term interest rate target at minus 0.1 percent and a pledge to guide 10-year government bond yields around zero percent.

The BOJ also said “inflation expectations have moved sideways recently,” offering a slightly more upbeat view than three months ago when it said they were on a weak note.

The central bank was still far from its peers who were looking for ways out of unconventional monetary policies.

“The BOJ kept is policies unchanged and made no real changes to its overall stance. It still remains a step behind other central banks looking to normalize their policies,” said Shusuke Yamada, chief Japan FX strategist at Bank of America Merrill Lynch.

The BOJ caused ripples in the markets earlier in January by slightly reducing the amount of longer-dated Japanese government bonds (JGBs) it buys from the market at its regular debt-purchasing operations.

The yen had appreciated significantly against the dollar as some traders speculated the central bank was preparing to scale back its massive stimulus.

In Tuesday’s press conference following the policy decision, BOJ Governor Haruhiko Kuroda put such notions to rest: “There is still some distance to 2 percent inflation, so we’re in no condition yet to debate the timing of an exit from ultra-easy monetary policy.

In response, the dollar pulled back from earlier losses and was last 0.2 percent higher at 111.100 yen.

The euro was down 0.2 percent at $1.2240 EUR= after gaining 0.3 percent overnight. The common currency was still within reach of a three-year peak of $1.2323 set on Wednesday.

The euro was supported ahead of the outcome of the European Central Bank’s meeting on Thursday, which could provide clues to future shifts in the central bank’s monetary policy.

The pound was a shade lower at $1.3961 GBP=D3 after touching $1.3992, its highest level since June 2016’s vote for Brexit, on optimism that Britain will reach a favorable divorce deal with the European Union. [GBP/]

The dollar index against a basket of six major currencies stood rose 0.15 percent to 90.524 .DXY.

In the virtual currency world, bitcoin was down 4.5 percent on the Bitstamp exchange BTC=BTSP at $10,320.13 following news that South Korea will ban the use of anonymous bank accounts in cryptocurrency trading from Jan. 30. While it was a widely telegraphed move designed to stop virtual coins from being used for money laundering and other crimes, the step also underscored authorities’ intent to close down avenues for spurious speculation.

Oil prices rose on Tuesday, lifted by healthy economic growth as well as the ongoing supply restraint by a group of exporters around OPEC and Russia. [O/R]

U.S. crude oil futures CLc1 rose 0.6 percent to $63.94 per barrel and Brent gained 0.56 percent to $69.42 per barrel LCOc1.

Spot gold XAU= tacked on 0.2 percent to $1,336.70 per ounce.


Point Of View:

Dollar still remains on defensive against its peers after US government was forced to shutdown on Monday. Dollar rebound after a gap down.

BOJ decided to keep its policy unchanged as they felt it is still far from the 2% inflation target.

Euro remain strong and market is expected ECB to be hawkish on Thursday.

Pound remains steadies as Britain will reach a favorable divorce deal with the European Union. If Brexit negotiation remains optimistic, pound will continue to rally. Otherwise, it is a pullback on longer term, and pound will dip thereafter.

Focus will be on Euro this week on Thursday ECB press conference. If ECB turn dovish, euro will dip. Otherwise Euro will be likely continue to rally through 2018.

Dollar remains on defensive and if global economy growth continue to stay proficient, dollar is likely to remain bearish.