Asian markets find their groove on BOJ stimulus

15.25 AEST, Wednesday 19 September 2012

Asian markets find their groove on BOJ stimulus
By Tim Waterer (Senior Trader, CMC Markets)

The scope of the stimulus measures announced by the Bank of Japan (BOJ) today caught the market a little off guard as evidenced by the sharp rise in the USDJPY rate and also the pronounced move higher by commodity prices. The BOJ announced it would increase the size of its asset purchases by 10 trillion yen to 80 trillion yen.

Central bank action has been coming thick and fast in recent weeks and whilst the news of stimulus today from the BOJ is generally welcomed, it is the Peoples Bank of China that traders really want to hear from when it comes to concrete measures to kick start their economy.

The Australian Dollar (AUD) has moved off its session lows in response to the BOJ announcement of additional stimulus, with the AUDUSD progressing beyond the 1.0450 level after earlier sinking to 1.0418 today. Performance of the AUD tonight will likely correlate with how far north the gold price moves during the offshore session.

What was looking like being a directionless session across Asia definitely received a reprieve in the form of the BOJ announcement. Gold moved around US$5 higher on the news and this was enough to assist the AUD. The Euro also took well to the news, moving around a quarter of a US cent higher. Market reaction by risk assets to the BOJ stimulus measures may have been only lukewarm when compared to the initial QE3 buying bonanza, however we have again seen how central bank pro-activity can quickly lift the mood of financial markets.

Following an indifferent start, the Australian sharemarket found its groove in the afternoon with the ASX200 reclaiming the 4400 level, and then some. The monetary stimulus measures announced by the BOJ were well received by commodities such as gold and oil which both turned higher, with these moves translating into reasonable gains for the local mining stocks. Attention will now turn to Chinese HSBC Flash Manufacturing PMI data due tomorrow. If we indeed see another sub 50 print, just how far below this benchmark level the number comes in at may be key in determining how Asian bourses fare tomorrow.

http://www.cmcmarkets.com/

© Scoop Media