(Bloomberg) — Stocks rebounded as traders shifted focus to the Bank of Japan’s press briefing and the potential for the Federal Reserve to turn dovish later Wednesday.
Most Read from Bloomberg
Financial shares led gains in the Topix index after the Bank of Japan raised interest rates to around 0.25%. The MSCI benchmark for Asian shares jumped more than 1.5%. US equity futures advanced with expectations that Chair Jerome Powell may signal a potential rate cut in September.
The action-packed day created gyrations across markets as traders digested the BOJ’s decision and geared up for the Fed. The yen fluctuated before trading 0.2% weaker against the greenback. Treasury yields stabilized after falling in the previous four sessions, while a Bloomberg gauge of dollar strength edged lower.
“Ueda’s conditions for further tightening in interest rate and JGB purchases will be key points to watch during his afternoon conference,” said Homin Lee, a senior macro strategist at Lombard Odier. “After this BOJ action, we think the US Fed will be back in the driving seat with its meeting due in less than 24 hours and the US employment report scheduled on Friday.”
Any comments by the Fed hinting at the possibility of a rate cut in September would support the narrative of a shrinking rate gap and likely support the yen. While the BOJ’s interest rate remains low by global standards, it is now at its highest since December 2008.
In other major moves, the Australian dollar fell and short-term bonds rallied after core inflation unexpectedly decelerated last quarter, prompting traders to boost bets on an interest-rate cut by the Reserve Bank. Chinese stocks jumped as anticipation grew for Beijing to enhance support for its struggling economy. South Korea’s Kospi Index climbed, buoyed by gains in Samsung Electronics Co. after the chipmaker reported its fastest pace of profit growth since 2010.
“The fall in AUD makes perfect sense — the market will now think the RBA can indeed converge closer to peers on the policy rate side,” said Tim Baker, strategist at Deutsche…
..
