World stock markets rose on Tuesday, helped by solid corporate earnings in Europe, progress on Greek debt talks, and a new pledge by Japan that it was prepared to weaken its currency. The MSCI All-Country World index climbed 0.4%, the pan-European FTSEurofirst 300 index advanced 1.3 percent, while the MSCI Emerging Market indexalso edged higher.
The yen jumped to a 18-month high against a weak dollar on Tuesday, extending gains that have undermined Japanese officials' attempts to reflate the developed world's most stagnant economy. The yen also rose sharply against the Australian dollar, up 1.7% after the Reserve Bank of Australia cut interest rates to record lows.
The dollar slid to its lowest against major currencies in well over a year on Tuesday, a move led by further gains in the yen that threw an uncomfortable spotlight on central banks' attempts to boost growth through aggressive policy easing. Australia's central bank joined the growing line of those adding stimulus, surprising many investors by cutting interest rates to a record low of 1.75%. That hit the currency but lifting the country's shares.
The U.S. dollar weakened against major currencies on Tuesday after weaker-than-expected U.S. economic data reinforced views that the Federal Reserve would take a dovish stance in a policy statement Wednesday. The U.S. dollar index, which measures the greenback against a basket of six major currencies, was last down 0.445 at 94.418 after U.S. March durable goods orders and April consumer confidence data came in below the expectations of economists polled by Reuters.
We could be in for another rocky week in the markets with particular focus back on the central banks as we get the latest monetary policy decisions from the Federal Reserve and Bank of Japan, the latter of which is expected to announce new stimulus measures.
The yen skidded by more than 1% to a 2-1/2-week low against the dollar on Friday after a report said that the Bank of Japan is considering expanding its negative rate policy to bank loans and could cut rates further. The BOJ could consider the new step if policymakers decide to lower the negative 0.1% interest rate applied to some bank reserves parked with the central bank, Bloomberg reported on its website.