Bank Of Japan Stimulates US Markets; Europe Slips On Draghi Comments

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US equities closed higher, rebounding from the biggest sell off in more than a month for the S&P 500 index, as cheer over Bank of Japan’s monetary stimulus offset a rise in US jobless claims.

Japan’s central bank provided the early boost to equities today with an announcement it would buy 7 trillion yen (about $73 billion) of bonds a month to haul the economy out of prolonged deflation.

The euphoria was tempered after the European Central Bank President Mario Draghi at a press conference in Frankfurt said the ECB will lower interest rates if the region’s economy weakened further. The central bank is considering ‘various instruments’ to support growth, Draghi added even as Europe’s sovereign debt crisis entered into a fourth year.

Draghi’s comments left investors disappointed as they expected the central bank to do more in the face of weakening economic trends in the eurozone.

Separately, the Bank of England also left rates unchanged at 0.5percent while maintaining its assets purchase target at GBP 375 billion.

The US Labor Department reported initial jobless claims rose by 28,000 to 385,000 in the week ended March 30, the highest since November 24 and more than forecast.

After swinging between a 75-point rise and a 12-point drop, the Dow Jones Industrial Average (DJIA) finished 56 points higher. The S&P 500 Index (SPX) rose 6 points with telecommunications rising the most and technology faring the worst among its 10 business groups.

Treasury prices advanced, pushing 10-year note yields to a near three-month low after more-than-expected Americans filed for unemployment benefits last week in a sign the labor market may be slowing.

The US dollar rallied against the Japanese yen after newly-appointed Bank of Japan Governor Haruhiko Kuroda announced massive stimulus programs to boost economic growth.

The ICE dollar index, a gauge of the greenback’s strength against a basket of six global currencies, however fell to 82.637 from 82.712 late Wednesday as the euro rebounded after the ECB kept interest rates on hold.

European markets fell, posting the biggest decline in a month, after European Central Bank President Mario Draghi expressed fears the eurozone economy may slip into a deeper recession.

The Stoxx Europe 600 index dropped 1.1 percent, extending yesterday’s 0.9 percent fall into a second session.

On the economic data front in Europe, the Markit services PMI confirmed the region’s continued downturn. The purchasing managers’ index fell to 46.4 from 47.9 in February and fell short of a preliminary reading of 46.5.

Our Trend Tracking Indexes (TTIs) offered a mixed picture again, as the Domestic TTI gained reaching a position of +3.32% above its trend line while the International TTI lost and slipped to +6.13%.

For all the latest charts and momentum figures, please see the updated StatSheet, which I will post shortly.

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