Thursday April 28th

28-04-2016

Dow futures briefly fall 150 points after BOJ surprise

U.S. stock index futures pointed to a sharply lower open on Thursday morning as traders reacted to the Bank of Japan's (BOJ) decision to keep monetary policy steady. In U.S. economic news, the first quarter U.S. GDP advance read was 0.5 percent, the slowest pace since the first quarter of 2014. Consumer spending increased at a 1.9 percent rate, the slowest since the first quarter of 2015 and down from the fourth quarter's 2.4 percent rate. Weekly jobless claims were 257,000. Treasury yields edged off lows, while the U.S. dollar held lower, off about half a percent. The euro was near $1.134 and the yen at 108.3 yen against the greenback as of 8:33 a.m. ET. U.S. stock index futures held near earlier levels, with the Dow futures off about 135 points after earlier falling more than 150 points. In Asia, Japan's Nikkei closed down 3.61 percent after the central bank disappointed a section of the market betting on further stimulus. Following the BOJ's decision, and the yen's subsequent strength, major Japanese exporters saw their shares tumble. Toyota closed down 3.27 percent, Nissan fell 4.31 percent and Honda was down 4.18 percent. A stronger yen is usually a negative for exporters as it reduces their overseas profits when converted into local currency. "The Bank of Japan though was widely expected to act as Japan's economy has dipped back into deflation for the first time since 2013. In addition the country's stock market has also been struggling and the yen has been strong against a weakening dollar," Adrian Lowcock, head of investing at AXA Wealth, said in a note. "The return of the deflation has led some to suggest that Abenomics is not working and even greater stimulus was required. As such the reaction to the lack of action has been negative, sending the stock market down and the currency up further," Lowcock added. Chinese mainland markets retreated, with the Shanghai composite closing down 7.46 points, or 0.25 percent at 2,946.20, while the Shenzhen composite dropped 2.20 points, or 0.11 percent, to 1,874.30. In Europe, the pan European Stoxx 600 Index was down by around 1.1 percent. Back in the U.S., investors will continue to digest the Federal Reserve's decision to keep rates on hold. On Wednesday, the Fed stuck to its message that it would be slow to raise rates, so economic data will be keenly eyed to frame expectations of when it might raise them again. Facebook reported quarterly earnings well above expectations on both the top and bottom line, helped by a sharp increase in mobile advertising revenue. The social media giant also proposed a new share structure. On the earnings front, Amazon.com, Amgen, Baidu and LinkedIn are among companies due to report after the bell. Oil futures were near 2016 highs on Thursday as analysts said supply disruptions, strong investor appetite and a weakening dollar could push prices higher soon. Brent crude futures rose 16 cents to $47.34 per barrel by 8:37 a.m. ET (1237 GMT), off an earlier high of $47.47. U.S. West Texas Intermediate (WTI) futures were up 14 cents at $45.47 a barrel. Both Brent and WTI recovered from an earlier dip as investors took profits. The contracts have rallied more than 70 percent since their respective 2016 lows in January and February. Gold rose 1 percent on Thursday to its highest in a week as the Bank of Japan held policy steady, boosting the yen versus the dollar, and after the Federal Reserve signalled that it was in no rush to tighten monetary policy. The Fed left interest rates unchanged after its latest meeting on Wednesday and, while keeping the door open to a hike in June, showed little sign it was in a hurry to tighten policy amid an apparent slowdown in the U.S. economy. Spot gold was up 0.7 percent at $1,254.31 an ounce, off an earlier one-week high of $1,258.70, while U.S. gold futures for June delivery were up $6 an ounce at $1,256.