Markets jump on back of surprise BOJ rate cut

European equities bounced back on Friday, tracking a strong rally in Asian shares after the Bank of Japan stunned markets by announcing negative interest rates in a bid to boost the economy. Japan’s central bank said it would charge 0.1 per cent for excess reserves parked with the institution, an aggressive policy pioneered by the European Central Bank. “The signal that the Bank of Japan gives reminds us that central banks will continue to play their role of fighting deflation,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global

Markets in Brussels. “These actions typically drive up risky assets,” he added. The pan-European FTSEurofirst 300 index rose 1.6 percent by 0815 GMT after having fallen 1.7 per cent in the previous session.

Asian shares jumped and the yen swooned earlier after the Bank of Japan surprise decision on rates. The yen fell across the board and the yield on the benchmark Japanese government bond plunged to a record low .

The move surprised investors, most of whom had believed policymakers were too cautious to ever adopt such a radical measure. Their reaction sent the dollar surging about three yen to a session high of 121.495. It was last up 1.7 per cent at 120.92 yen. The dollar was last up 0.4 per cent against a basket of currencies at 98.885, though still down about 0.7 per cent for the week. The euro slipped about 0.2 per cent to $1.0913, on track to gain about 1.1 per cent for the week.

Japan’s Nikkei share index whipsawed after the announcement before ending up 2.8 per cent, to mark a 3.3 per cent weekly gain, while the benchmark 10-year JGB yield touched an all-time low of 0.090 per cent.

China stocks rose more than 3 per cent on Friday, recovering losses at the end of a tumultuous week, having recorded their worst month since the global financial crisis.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen ended up 3.2 per cent, to 2,946.09, while the Shanghai Composite Index gained 3.1 per cent, to 2,737.60 points.

Both indexes tumbled over 20 per cent in January, their biggest monthly loss since the 2008-09 global financial crisis.

For the week, CSI300 was down 5.4 per cent, while SSEC lost 6.1 per cent.