Global stocks bounce but sterling slippery after BoE buys bonds

Global stocks bounce but sterling slippery after BoE buys bonds

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1.5 per cent and eyeing its best session in a month. Japan’s Nikkei rose 0.9 per cent. — AFP pic

Thursday, 29 Sep 2022 10:21 AM MYT

SYDNEY, Sept 29 ― Asian share markets rose today after Britain’s central bank launched an emergency bond buying programme to stabilise a furious sell-off in gilts, though trade was skittish and sterling remained under pressure.

The Bank of England said it will buy as much as £5 billion (RM25 billion) a day of long-dated government bonds until Oct. 14. It spent about a billion pounds yesterday and 30-year gilt yields fell 105 basis points, the biggest drop ever according to Refinitiv records stretching back to 1992.

The move buoyed sterling and offered some salve to a fractious mood in markets, but by mid-morning in Tokyo the pound was already struggling for support and down 0.6 per cent to US$1.0818.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1.5 per cent and eyeing its best session in a month. Japan’s Nikkei rose 0.9 per cent.

“It’s all a bit of a mess,” said ANZ economist Finn Robinson.

“How long the calm and fresh optimism lasts remains to be seen. For one, this re-stimulation will lift, not quell UK inflation, and that’s bad for bonds and sterling.”

The fallout from unfunded tax cuts announced in Britain last week has reverberated across financial markets after setting off a collapse in British asset prices. The BoE’s intervention followed steps in Korea, India and Indonesia to stabilise their financial markets this week as the US dollar rallied broadly.

US Treasuries rebounded in sympathy with gilts overnight, and benchmark 10-year yields, which had pipped 4 per cent a day ago, were down more than 20 bps to sit at 3.7472 per cent.

Wall Street rallied, too, with the S&P 500 snapping a six-day losing streak to surge nearly 2 per cent.

The mood gave pause to the US dollar’s march higher and the dollar index had its worst session in 2-1/2 years as the greenback recoiled from lofty heights. It was soon trading firmly again, however, in Asia on Thursday.

The dollar index was up 0.1 per cent to 113.12, within striking distance of yesterday’s 20-year high of 114.78. The euro fell about 0.5 per cent to US$0.9695.

The Australian dollar, meanwhile, got a brief lift today and traded just above US$0.65 after a new data series from the statistics bureau showed some high inflation readings for July and August.

The dollar’s pullback helped oil and gold make gains, which were held into the Asia day. Brent crude futures rose 0.2 per cent to US$89.50 a barrel. Spot gold was steady at US$1,656 an ounce. ― Reuters