- Bank of Japan maintains negative rates, targets yield curve
- Policy statement boosts financial sector shares by over 5%
- 'Our positions should benefit from a Fed hike' — Garnry
- Gold, miners supported by BoJ but FOMC could change everything
- Oil markets gyrate wildly after shock API inventories drop
By Michael McKenna
One of this week's two major central bank outings is now behind us with the Bank of Japan releasing its latest monetary policy statement in the late Tokyo session. The Federal Open Market Committee's statement, of course, will be released at 2 p.m. today, Eastern Standard Time, promising volatility and volume even if the Fed fails to surprise with the fabled rate rate hike.
BoJ decision boosts financials, sends yen tumbling
In Tokyo, the BoJ maintained its minus 10 basis point rate stance and targeted the yield curve. Speaking live on today's Morning Call
, Saxo Bank APAC macro strategist Kay Van-Petersen said that the central bank "is looking to buy the near-end of the curve while letting the back-end go up." This, of course, benefits banks and insurers – a hugely significant sector of the Japanese economy – while the consequent drop in the yen's value has boosted equities as a whole.
"We were long Nomura via CFD ahead of the announcement," says Saxo equities head Peter Garnry, adding that he is looking to take profits at 500; as it stands, the Nomura Holdings CFD is trading in the mid-480s in Tokyo.
In Garnry's view, the upward surge seen in Japanese financials – the sector is currently up by over 5% – represents a generally positive market consensus on the BoJ's decision, but he notes that he does not expect to hold the Nomura trade past 500 as the momentum is simply not that strong.
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Source: Saxo Bank
"Markets were mixed going into the BoJ statement," says Van-Petersen, "and they were mixed going out as well. My key concern here is a ripple effect towards higher yields in the G3 space."
Beyond Japanese banks, Garnry notes that he is currently looking at a long position in Coca-Cola as "the selloff has largely exhausted itself."
Saxo's head of equity strategy says that Coca-Cola shares could benefit from improved conditions in emerging markets, stating that he will target $44/share while placing a stop-loss at $41.50.
'Stale' gold markets find support
Garnry is also looking towards the commodities space this morning, where Saxo head of commodities strategy Ole Hansen notes that the BoJ move has spurred gold demand. In Garnry's view, the policy shift will likely benefit miners such as Glencore, which he plans to buy at the opening bell with a stop at 186 and a target of 250 (GBp).
Although gold has benefitted from the BoJ decision, however, Hansen remains of the view that the XAU market is "stale" with the BoJ support not likely to drive gold prices out of their current range.
"It will likely not even drive prices to the top of the current range," he says, adding that the precious metals market is in need of a correction.
"A move down to $1,250/oz would have gotten investors moving, but given the BoJ decision, that might not happen," says Hansen.
Beyond those assets most closely tied to the news out of Tokyo, Hansen also reports that crude prices continue to gyrate in the wake of yesterday's shock API numbers that saw a 7.5 million barrel drop in oil inventories one day ahead of today's EIA print where forecasters still expect a 3m barrel gain.
In terms of crude fundamentals, of course, the main event remains next week's Opec summit in Algiers, but even that pales into relative insignificance ahead of today's statement from the FOMC.
"That could change everything," says Hansen.
Back to you, Janet... Photo: iStock
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