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Aug 5, 2016

Asian Markets at Close Report, by MarketWatch on August 5, 2016: Asian Markets Rev Up After BOE Aggressive moves

Kenan Machado

A previous version of this story gave an incorrect move for the pound. The story has been corrected.
AFP/Getty Images
Asian stock markets took off in early trading Friday.
Asian shares rose Friday, driven by the Bank of England’s aggressive stimulus measures, but with traders keeping a wary eye on U.S. jobs data due later in the global trading day.
The Nikkei Stock Average NIK, +0.00% was up 0.1%, while the S&P ASX/200 XJO, +0.39%   trading 0.4% higher. Korea’s Kospi SEU, +0.90%   was up 0.9%. Hong Kong’s Hang Seng HSI, +1.44%   rose 1.4%. The Shanghai Composite SHCOMP, -0.19%  dropped 0.2%.
The Bank of England on Thursday cut its benchmark interest rate to 0.25% from 0.5%, the lowest in its 322-year history. It expects to cut the rate further in the months ahead. The central bank also revived a U.K. government bond-buying program, also known as quantitative easing, that has been on pause since 2012, and said it would begin buying corporate bonds.
That pushed the pound GBPUSD, +0.3357%   sharply lower against other currencies, dropping 1.6% against the dollar at the end of the U.S. trading day Thursday. It was relatively flat at $1.312 in morning Asian trade. Despite the overnight rally in the ICE U.S. dollar index, Asian currencies were largely stable. Yields on the 10-year U.K. government notes sank to a record low of 0.64% in U.S. trading.
“Surprising the market was always going to be a tall order,” said Timothy Graf, head of macro strategy at State Street Global Markets EMEA. “But it looks like the Bank of England has done just that.”
Central banks across the world are using the room they have to lower interest rates and buy bonds, among other measures, to nudge their economies to growth.
Australia’s central bank Friday signaled further interest rate cuts are likely as inflation may be below its 2%-3% target until the end of 2018. This comes after it cut on Tuesday its overnight cash rate by a quarter of a percentage point to a record low 1.50%.
“High [market] expectations for global monetary and fiscal easing are steadily being met,” said Angus Nicholson, a market analyst at IG Markets in Australia.
Adding to the market cheer was a higher-than-expected fall in U.S. gas inventories that helped oil prices there rise Thursday. Government data released Wednesday in the U.S. surprised traders, showing gasoline inventories fell by 3.3 million barrels, 10 times higher than expected. However, in morning trade in Asia, benchmark Brent crude was trading 0.5% lower.
Investors were cautious about U.S. jobs data due later Friday. The U.S. Labor Department will release a broad snapshot of the labor market with economists forecasting a seasonally adjusted July payroll gain of 179,000, in line with the pace of job creation so far this year. They project the unemployment rate to drop to 4.8%. However, initial claims for unemployment benefits, an indicator of job loss across the U.S., rose in the week ended July 30, the department said Thursday.