A tweak of the central bank stimulus on tap in Japan has generated some optimism in European markets that monetary policy isn’t dead and gone just yet.
Banks have led the charge on the FTSE 100 with Barclays (LON:BARC) atop the leader board, rising over 4%. By setting a yield curve target and shying away from cutting interest rates, the Bank of Japan is trying to engineer a profitable environment for banks. Bank shares are rallying on hope that it works. A yield curve target could be a template for the European Central Bank in its attempt to reduce the harm to the banking sector of low interest rates.
Shares are off their opening highs, tracking a late rise in the Japanese yen. The initial enthusiasm for the Bank of Japan’s policy review is turning to scepticism. The statement saying the BOJ will aim to “overshoot” its inflation target is good but if hasn’t even managed 2%, what’s the chance of it reaching something above it.
Shares of Majestic Wine (LON:WINEW) were smashed more than a connoisseur of its product. Shares dived more than 25% after the wine merchant issued a profit warning. The profit warning was in part because of a failed drive to push its newly acquired ‘Naked Wines’ brand in the US. Like in most industries, the US market is very lucrative, but a difficult one to crack for foreign firms.
An update from another British purveyor of booze was a bit more upbeat. Diageo (LON:DGE) reiterated its sales growth target thanks to stable demand and improved operational efficiencies.
Stocks in the US look set for a higher open, matching gains seen across Europe following the Bank of Japan’s tweak to its monetary policy. Gains are expected to be capped ahead of today’s monetary policy decision from the Federal Reserve.
Shares of Microsoft (NASDAQ:MSFT) are expected to open higher after the tech giant announced an 8% dividend hike and plans to buyback another $40bn in stock.
USA pre-opening levels
S&P 500: 8 points higher at 2,147
Dow Jones: 68 points higher at 18,197
Nasdaq 100: 19 points higher at 4,824
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