Japanese stocks edged higher on Friday as traders reacted to a move by the European Central Bank to expand stimulus measures. Stocks in Europe intially jumped on the announcement also but later fell with major indices in the region closing on the red, only to rebound strongly today yet again.
ECB Interest Rate Cut
The drop after the initial rally likely came on traders reacting to President Mario Draghi saying further cuts are unlikely. Traders reacted to the news by pushing the euro higher against the dollar as stocks in the Eurozone fell sharply. Fickle traders have evidently changed their minds today, as European markets are higher across the board today.
The US market has opened higher as well, with the S&P 500 logging a 0.85% gain as the ECB has cut interest rates from 0.05% to 0%. The bank also cut the deposit rate to minus 0.4% from minus 0.3%. Draghi at a press briefing reiterated that the risk of a further drop in the euro-area growth rate is still high. He, however, expects the rate of inflation to remain negative prior to it picking up later in the year.
Topix erased earlier losses to close the day at a high of 1,3559.32 a 0.5% increase. The Nikkei 225 was also up by 0.5% closing the day at a high of 16,938.87. Canon Inc was up by 1.9% on Friday as Sony erased 2.2% worth of losses to close the day on a high of 0.3%.
The yen, on the other hand, shed as much as 0.2% against the dollar to trade at about 113.44. The yen losing ground against the dollar came as a relief for exporters. The impressive run on Friday came on the back of nine straight weeks of turmoil that saw foreign investors slim their stakes in Japanese stocks.
The ECB now plans to expand its quantitative easing program from €60 billion to €80 billion a month. On inflation, the bank projects an inflation rate of about 0.1% from an initial target of 1%.