(Bloomberg) -- Asian equities jumped on Thursday following the strongest day for US stocks since early August after the Bank of England unveiled a bond-buying program that triggered a global rally in government debt.
Equities rose in Japan, Hong Kong and Australia, mirroring a 2% advance for the S&P 500, which snapped a six-day losing streak.
The rally in riskier assets was triggered by the BOE’s plan to purchase up to £65 billion ($71 billion) in UK government debt over the next two weeks. The move averted a crisis for retirement funds and has lifted risk sentiment in Asia’s markets Thursday.
The region’s financial authorities have been on high alert in recent weeks, with China, Japan and South Korea among nations taking action in markets to prevent a downward spiral. China’s onshore yuan advanced for the first time in nine sessions, after the central bank issued a verbal warning against currency speculation.
The BOE’s bond buying buoyed the pound, which recently fell to the lowest since 1985. It was weakening again Thursday morning in Asian trading as the dollar rose slightly against its Group-of-10 counterparts
“The central bank is in a very difficult position right now,” Julie Biel, Kayne Anderson Rudnick portfolio manager and senior research analyst, said of the BOE in an interview with Bloomberg TV. “Everyone has been a little bit backed into a corner in seeing the volatility and market reaction.”
Treasuries rallied Wednesday while a Bloomberg dollar index fell by the biggest margin since the early weeks of the pandemic. Treasuries were little changed Thursday.
Federal Reserve officials continued to hammer home the central bank’s hawkish outlook. The Fed’s Atlanta President Raphael Bostic said he backs raising rates by a further 1.25 percentage points by the end of this year to counter inflation that has been worse than he expected.
“All eyes are on inflation and interest rates,” said Josh Emanuel, chief investment officer of investment management at Wilshire. “Equities are really going to take their cues from bond market. So if you see bond yields move lower, that is a good sign for equities.”
European Union officials unveiled fresh economic limits on Russia in response to further annexing of Ukraine. The new round of sanctions would bar sales of Russian oil by third party countries beyond a set price cap. The plan would inflict around $6.7 billion in economic pain on Russia.
“The markets are very pessimistic. Investors are fairly on the sidelines,” said Julia Raiskin, Asia-Pacific head of markets for Citigroup Inc. “Other than the dollar, there are not many assets that are trading constructively.”
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Key events this week:
- Euro zone economic confidence, consumer confidence, Germany CPI, Thursday
- US initial jobless claims, GDP, Thursday
- Fed’s Loretta Mester, Mary Daly speak at events, Thursday
- China PMI, Friday
- Euro zone CPI, unemployment, Friday
- US consumer income , University of Michigan consumer sentiment, Friday
- Fed’s Lael Brainard and John Williams speak, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 10.42 a.m. in Tokyo. The S&P 500 climbed 2%
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 jumped 2%
- The Topix index added 0.4%
- Australia’s S&P/ASX 200 Index jumped 1.8%
- The Kospi index rose 1.9%
- The Hang Seng Index gained 2%
- Shanghai Composite Index added 0.8%
- Euro Stoxx 50 futures gained 0.6%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The Japanese yen fell 0.2% to 144.37 per dollar
- The offshore yuan weakened 0.3% to 7.1838 versus the dollar. Its onshore counterpart strengthened
- The euro fell 0.5% at $0.9685
Cryptocurrencies
- Bitcoin traded flat at $19,554
- Ether slipped 0.2% to $1,347
Bonds
- The yield on 10-year Treasuries rose two basis points to 3.75%
- Australia’s 10-year yield declined 19 basis points to 3.91%
Commodities
- West Texas Intermediate crude fell 0.5% to $81.75 a barrel
- Gold was at $1,654.83 an ounce