European and US stock markets slipped yesterday, taking their lead from Tokyo which fell heavily as the Bank of Japan (BoJ) shocked traders by deciding against fresh stimulus measures.
The surprise move by the BoJ came a day after the US Federal Reserve provided a positive outlook on the global economy, highlighting mixed signals from the world’s leading central banks.
Weak US economic growth data for the first quarter released Thursday and bleak data in Spain, including bloating unemployment figures, seemed to weigh on market sentiment.
London’s benchmark FTSE 100 index was 0.2% lower compared with Wednesday’s closing level.
In the eurozone, Frankfurt’s DAX 30 index drifted 0.3% and the Paris CAC 40 was down 0.7% in value.
The eurozone “was dealt another inflation blow as Spain’s latest CPI (inflation) reading came in at far worse than expected”, said Connor Campbell, analyst at Spreadex trading group.
“On top of that its unemployment rate ticked up to 21%, painting a sorry picture of the country’s economy ahead of Spain’s second general election” in June.
In the US, the Dow Jones Industrial Average was slightly lower after the US Commerce Department estimated first-quarter economic growth at a feeble 0.5%, lagging expectations.
Tokyo’s Nikkei index plunged more than 3.5% yesterday as the Bank of Japan shocked markets by holding fire on a fresh round of widely expected stimulus measures, sparking questions about whether it had anything left in its arsenal to kick start the stuttering Japanese economy.
“Both foreign exchange and equity markets have given the Bank of Japan’s unchanged policy decision the thumbs down, with the yen rising as much as 2.0% against the US dollar,” said Jeremy Cook, chief economist at foreign exchange group World First.
Traders had widely expected the BoJ to unveil fresh measures to shore up the world’s number three economy after this month’s deadly earthquakes in southern Japan and a string of weak data.
“It’s a total shock,” said Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors.
“From currencies to equities to everything—you can see the reaction in the markets. I can’t believe this. It’s very disappointing.”
Weak data yesterday—including the biggest fall in Japanese consumer prices for three years—reinforced the challenge facing authorities in kick-starting growth and igniting inflation in the country.
Meanwhile after a much-anticipated policy meeting in the US, the Fed on Wednesday decided against hiking interest rates and stood by its stance that any further rises would be slow and small as economic growth remained relatively weak.
However, its post-meeting statement suggested it was less concerned about the global economic outlook than it was at the start of the year when it cited turmoil in world markets for lowering its forecasts for rate hikes in 2016.
While analysts argued over what the Fed’s comments meant for the timing of its next rate rise, investors welcomed the prospect that they will stay low well into the second half of the year.
In London, the FTSE 100 down 0.2% to 6,309.42 points; Frankfurt - DAX 30 down 0.3% at 10,268.01 points and Paris - CAC 40 down 0.7% at 4,529.25 points.
A logo is displayed on an interactive sculpture in the main atrium of the London Stock Exchange headquarters. The FTSE 100 closed down 0.2% to 6,309.42 points yesterday.
