U.S. stocks close at five-year high; Treasuries gain, yen falls

‘Material Change’

“The market has in its head that there is going to be a material change in BOJ policy,” said Jeremy Hale, head of macro strategy at Citigroup Inc. in London. “The BOJ is expected to announce further easing next week. In the short-term I think the yen can weaken further as the BOJ announces further stimulus. The market is expecting a sea-change in policy when the new governor comes in and that will be the big test.”

Japan’s currency has tumbled 13 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes, on speculation the Bank of Japan will heed Shinzo Abe’s calls for greater stimulus to boost the economy, which may debase the currency.

The central bank will adopt the government’s desired 2 percent inflation target at its Jan. 21-22, according to 20 of 22 economists surveyed by Bloomberg News. All 22 expect the BOJ to add to its asset-purchase program, its main policy tool amid near-zero interest rates, with the median forecast for a 10 trillion yen increase.

Developing Nations

The MSCI Emerging Markets Index rose 0.7 percent. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong added 2.1 percent to the highest level since August 2011. China’s gross domestic product expanded 7.9 percent in the fourth quarter from a year earlier, up from a three-year low of 7.4 percent in the previous period, National Bureau of Statistics data showed.

Russia’s Micex Index jumped 1.1 percent as Sberbank, the nation’s largest lender, jumped 2.2 percent to the highest close since July 2011. OAO Magnit, the country’s biggest food retailer by market value, rose 2.8 percent, also rose to a record. Energy shares led India’s Sensex to a two-year high as the government allowed oil companies to raise diesel prices, with 66 percent more shares traded than the 30-day average volume.

Bloomberg News

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