Stocks jump worldwide as Bank of Japan rate goes negative

The Bank of Japan said it’s imposing a 0.1 percent fee on some deposits left with the central bank, effectively a negative interest rate.

‘The BoJ is well aware that significant market turbulence can negatively affect the real economy, and the easing measure is more of a pre-emptive and symbolic move’. By 1230 GMT it was up 1.8 percent at 120.97. The European Central Bank and the Swiss National Bank have adopted negative interest rates to some degree.

The pan-European FTSEurofirst 300 .FTEU3 index closed 2.27 percent higher at 1,348.08. It was well off last month’s trough of 115.97, when steep falls in global equities prompted investors to pile into the safety of the Japanese currency.

Gold futures on the COMEX division of the New York Mercantile Exchange rose slightly Friday after worse-than-expected US economic growth data.

“Expectations run high that other central banks in Asia including the People Bank of China and Bank of Thailand would boost the economy in a similar manner”, it said.

Markets clearly expect ECB President Mario Draghi to act again when the central bank next meets in March.

The yield on benchmark 10-year Japanese government bonds plunged to a record low of 0.09 per cent, and the yen fell 1.87 per cent to 121.03, on track for its biggest daily decline against the USA dollar in over a year.

The dollar index .DXY , tracking the dollar against a basket of major currencies, rose 1.1 percent to 99.594.

US crude added about 1.2 percent to $33.61 per barrel and Brent futures also gained 1.2 percent to $34.28. However, economists remain wary of declaring it the start of a sustained pick-up in prices, which have languished for 18 months due to low oil prices and weak growth.

North American stocks moved higher for a fourth straight day following a strengthening of global markets.

“We do not think negative rates are a game changer”, said Commerzbank strategist Esther Reichelt, in Frankfurt. Over January London’s top flight has fallen 2.5 per cent, wiping around £37 billion off share prices.

In the wake of slowing global economic growth and market turmoil, El-Erian said his base case is for just two rate hikes this year, as opposed to the four the Fed had been forecasting, and possibly even one or none if economic and financial market conditions worsen. The 37-basis-point decline in January was its biggest monthly drop since May 2012.

Only Switzerland is the only country, where 10 year yield is negative.

Following the dollar’s surge from levels below ¥119 sparked by the BOJ’s additional monetary easing step, the dollar-yen rate was mainly subject to position-adjustment transactions on Monday, traders said.