SINGAPORE – Stocks in Asia went up on Tuesday because the sudden change in British fiscal policy made investors feel better. Meanwhile, the value of the pound came close to a two-week high on hopes that the Bank of England might delay plans for quantitative tightening even more.
MSCI’s broadest index of Asia-Pacific stocks outside of Japan was up 1.5%, while Japan’s Nikkei rose 1.9%.
European stock futures showed that stocks were going to keep going up. The Eurostoxx 50 futures went up 1.25 percent, the German DAX futures went up 1.22 percent, and the FTSE futures went up 0.87 percent. Futures for the S&P 500 and Nasdaq in the U.S. also pointed to higher opening prices.
The British central bank has already put off starting a plan to sell off 838 billion pounds ($954.90 billion) worth of government bonds. The Financial Times reported on Tuesday that the bank is likely to speed up the sale of the bonds.
The FT report comes a day after Britain’s new finance minister, Jeremy Hunt, threw out most of Prime Minister Liz Truss’ economic plan. This plan had caused political chaos and market turmoil, which forced the Bank of England to step in and calm the bond market.
Sterling’s last price was $1.1382, which was up 0.26% for the day and added to its 1.6% gain from the previous session. The pound rose 0.36 percent to $1.1398, which is close to Monday’s high of $1.144, which was the strongest since Oct. 5.
Analysts at Morgan Stanley (NYSE:MS) said that the government’s U-turn would likely have big effects on the BoE, since its economists have now changed their prediction for the November meeting from a 100-basis-point rate hike to a 75-basis-point rate hike.
Tapas Strickland, head of market economics at National Australia Bank, said, “Given that Truss has broken so many of his Tory leadership promises, it is still unclear how long he will stay in power.”
China’s stock market went up by 0.2% this week, even though the Communist Party’s congress, which happens every 10 years, is still going on.
Banking sources told Reuters on Monday that Chinese state banks are stepping up their efforts to defend the weakening yuan. Many companies have also announced share buyback plans.
The dollar index fell by 0.178%, reaching its lowest level since Oct. 6. Meanwhile, the euro rose by 0.21% to $0.9859.
The Australian dollar went up on Tuesday after the Reserve Bank of Australia said it expects to raise interest rates again in the coming months.
On Monday, the yen hit a new 32-year low of 149.10 per dollar, which is close to the psychological number of 150. [/FRX]
Investors have been watching out for any signs of further intervention by the Bank of Japan, with authorities repeatedly warning of a firm response to overly rapid yen declines.
Intervention is more about the speed of moves than levels, said Ray Attrill, head of foreign-exchange strategy at National Australia Bank.
“I don’t think the Japanese authorities are particularly keen to see dollar yen at 150 in the immediate term and that’s why markets are being a bit guarded.”
Meanwhile, China has delayed the release of economic indicators, including the country’s third-quarter gross domestic product due on Tuesday and trade data that had been scheduled for last Friday.
The drop in the dollar helped prop up gold as well as oil prices.
Brent crude futures rose 74 cents, or 0.8%, to $92.36 per barrel by 0505 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 78 cents, or 0.9%, to $86.24 per barrel.
Spot gold was up 0.2% at $1,651.75 per ounce. [O/R]
