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

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TOKYO – 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 to open 0.3 percent higher, Germany’s DAX 0.5 percent and France’s CAC 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 added 1.4 percent.

Japan’s Nikkei rose to a 26-year peak, Hong Kong’s Hang Sang scaled a record high and Singapore 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 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 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. –Reuters

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