This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.theguardian.com/business/live/2016/jan/29/volatile-trading-bank-japan-negative-rates-live

The article has changed 18 times. There is an RSS feed of changes available.

Version 4 Version 5
Global stock markets surge after Japan's shock move to negative interest rates – live Global stock markets surge after Japan's shock move to negative interest rates – live
(35 minutes later)
8.54am GMT
08:54
Julien Manceaux, economist at Capital Economics, has looked at the French GDP numbers in more detail. The eurozone’s second-largest economy grew just 0.2% in the fourth quarter as consumer spending declined, partly due to the terrorist attacks in Paris but also the warm weather. The economy expanded just 1.1% in 2015 as a whole.
If these figures are confirmed next month, it would mean that last year’s hopes to see 2015 showing a stronger recovery of 1.5% will never materialise. Worse, this is now all we can hope for in 2016. Indeed, 2015 had all the reasons to be better: some structural reforms, tax cuts for households and companies, a weaker euro and low energy prices should have made of 2015 the year of the recovery. But confidence never returned enough to ensure that, leaving business investments and job creations too low.
Looking ahead, we expect the labour market to gradually stabilise and reinforce confidence in coming months, mostly because of new measures announced to the government. This means that the recovery is likely to continue to unfold in coming months, albeit at a slower pace than expected. If better labour market figures do not materialise soon, the risk is to see domestic demand faltering when temporary factors like low energy prices will see their effects abate.
The IMF recently forecast a tiny recovery for France in 2016 (1.3%). It may look pessimistic now, but if 2016 unfolds as 2015, it may become reality. However, there are still reasons to hope for a more dynamic recovery: if private consumption rebounds once more thanks to a more stable job market and that investments increase faster (because of the end of the downward housing cycle and important tax rebates for SME investments), we still believe that GDP growth could reach 1.6% in 2016. However, the risks already look oriented to the downside.”
8.45am GMT
08:45
Here’s a handy explainer on how negative interest rates work, following the Bank of Japan’s surprise move overnight. In 2014 the European Central Bank imposed negative interest rates of -0.1% on eurozone banks – to encourage them to lend to small firms rather than to hoard cash.
8.39am GMT
08:39
Connor Campbell, financial analyst at Spreadex, has looked at the markets:
After a shaky end to Thursday the markets have surged into life this Friday morning following the decision by the Bank of Japan to implement negative interest rates.
The move follows the latest failing of ‘Abenomics’ to significantly boost Japan’s inflation, and has helped (temporarily) ease some of the macro-tensions that have plagued the start to 2016. This has led to a rather robust rebound from the European markets; the FTSE, also aided by a steady $35 per barrel level for Brent Crude, jumped 80 points after the bell, leaving the UK index just about back above the 6000 mark.”
8.39am GMT
08:39
Oil is continuing its recovery, with Brent crude now up half a dollar, or 1.5%, at $34.40 a barrel. It is heading for its fourth day of gains, spurred by hopes of a deal among oil producers to rein in the supply glut.
Michael Hewson, chief market analyst at CMC Markets UK, said:
While the move higher has been helped in no small part by vague chatter of some form of output deal between Russia and Opec, without agreement from Iran which seems unlikely, there is about as much chance of that happening as Aston Villa winning the Premier League this year. The main reason oil prices appear to have found a base is a weaker US dollar, as well as some position covering heading into month end, which is helping support prices.”
Updated
at 8.58am GMT
8.34am GMT
08:34
The yen is sliding after the Bank of Japan stunned markets by moving into negative interest rates. It imposed a 0.1% fee on some deposits parked with the central bank, which means it will charge banks interest.
The dollar jumped more than 2% against the yen at one stage to 121.495 yen, its highest level in more than a month, and is now trading at 120.82 yen, up 1.7% on the day.
8.27am GMT
08:27
European stock markets have got off to a strong start:
8.17am GMT8.17am GMT
08:1708:17
Spain grows 0.8% in fourth quarterSpain grows 0.8% in fourth quarter
....and Spain has just followed suit with strong GDP figures: the eurozone’s fourth-largest economy posted another 0.8% gain in the fourth quarter. ¡Ay, caramba!....and Spain has just followed suit with strong GDP figures: the eurozone’s fourth-largest economy posted another 0.8% gain in the fourth quarter. ¡Ay, caramba!
But economists at Capital Economics say a pick-up in eurozone growth in the fourth quarter is now unlikely, because France was relatively weak.But economists at Capital Economics say a pick-up in eurozone growth in the fourth quarter is now unlikely, because France was relatively weak.
Austria grew 0.3% between October and December, the same as in the previous quarter.Austria grew 0.3% between October and December, the same as in the previous quarter.
OFFICIAL: Spain's GDP grew by 0.8% in Q4. That brings the 2015 growth rate to +3% => best yearly performance since 2007. ¡Felicitaciones!OFFICIAL: Spain's GDP grew by 0.8% in Q4. That brings the 2015 growth rate to +3% => best yearly performance since 2007. ¡Felicitaciones!
#Austrian #GDP growth reported at 0.3% q/q in Q4 2015. #French GDP was up 0.2% q/q. Bank of #Spain has estimated Q4 growth at 0.8% q/q (1)#Austrian #GDP growth reported at 0.3% q/q in Q4 2015. #French GDP was up 0.2% q/q. Bank of #Spain has estimated Q4 growth at 0.8% q/q (1)
Morning. French GDP grew just 0.2% qq in Q4 as hh spending fell. Spain posted another 0.8% gain but pick-up in EZ growth in Q4 now unlikely.Morning. French GDP grew just 0.2% qq in Q4 as hh spending fell. Spain posted another 0.8% gain but pick-up in EZ growth in Q4 now unlikely.
UpdatedUpdated
at 8.18am GMTat 8.18am GMT
8.09am GMT8.09am GMT
08:0908:09
The French economy – the second largest in the eurozone – grew just 1.1% in 2015, Insee said. Again, it was outperformed by Britain with 2.2% growth, although that was down from 2.9% in 2014.The French economy – the second largest in the eurozone – grew just 1.1% in 2015, Insee said. Again, it was outperformed by Britain with 2.2% growth, although that was down from 2.9% in 2014.
France is the first country in the eurozone to publish growth figures for the end of 2015.France is the first country in the eurozone to publish growth figures for the end of 2015.
UpdatedUpdated
at 8.11am GMTat 8.11am GMT
8.07am GMT8.07am GMT
08:0708:07
French economy grows 0.2% in Q4French economy grows 0.2% in Q4
French GDP data out this morning was bang in line with expectations: the flash estimate for the fourth quarter showed the French economy expanded by 0.2%, a slight slowdown from 0.3% in the third quarter. This compares with 0.5% growth in the UK between October and December.French GDP data out this morning was bang in line with expectations: the flash estimate for the fourth quarter showed the French economy expanded by 0.2%, a slight slowdown from 0.3% in the third quarter. This compares with 0.5% growth in the UK between October and December.
Consumer spending in France dropped 0.4%, the national statistics agency Insee said. Insee warned earlier this month that the Paris terror attacks in November had a significant impact on hotel trade. Unusually warm weather in France also weighed on consumer spending by reducing demand for heating and clothing.Consumer spending in France dropped 0.4%, the national statistics agency Insee said. Insee warned earlier this month that the Paris terror attacks in November had a significant impact on hotel trade. Unusually warm weather in France also weighed on consumer spending by reducing demand for heating and clothing.
#France GDP slowed in Q4 (0.2% qoq vs 0.3 in Q3). Terrorist attacks likely had some impact on activity#France GDP slowed in Q4 (0.2% qoq vs 0.3 in Q3). Terrorist attacks likely had some impact on activity
#France | GDP really poor quality ...inventories pic.twitter.com/7yNWUHqzlw#France | GDP really poor quality ...inventories pic.twitter.com/7yNWUHqzlw
7.41am GMT7.41am GMT
07:4107:41
Meanwhile, the Russian central bank is expected to leave interest rates on hold today, because further easing could exacerbate the rouble’s weakness.Meanwhile, the Russian central bank is expected to leave interest rates on hold today, because further easing could exacerbate the rouble’s weakness.
The bank slashed rates by 6 percentage points to 11% in the first half of 2015 when western sanctions over Ukraine led to a deepening economic decline, but has left them unchanged since July. The country, which relies heavily on oil exports, has been hit hard by the slump in crude oil prices over the past year.The bank slashed rates by 6 percentage points to 11% in the first half of 2015 when western sanctions over Ukraine led to a deepening economic decline, but has left them unchanged since July. The country, which relies heavily on oil exports, has been hit hard by the slump in crude oil prices over the past year.
The rouble plummeted to all-time lows against the dollar last week when oil prices fell to fresh 13-year lows and global stock markets tumbled.The rouble plummeted to all-time lows against the dollar last week when oil prices fell to fresh 13-year lows and global stock markets tumbled.
Some economists are even speculating that rate hikes could be back on the agenda soon. At its last meeting in December Russia’s central bank said it had drawn up a risk scenario that projected oil prices at $35 for the next three years, but they have since fallen below that level. Brent crude, the global benchmark, dropped below $27 a barrel last week but has since recovered to $34.72.Some economists are even speculating that rate hikes could be back on the agenda soon. At its last meeting in December Russia’s central bank said it had drawn up a risk scenario that projected oil prices at $35 for the next three years, but they have since fallen below that level. Brent crude, the global benchmark, dropped below $27 a barrel last week but has since recovered to $34.72.
But Russia’s recession is far from over. A spate of economic data on Monday showed how dire the situation is: the economy shrank 3.7% last year, retail sales slumped more than 15% year-on-year in December, real wages fell 10% and capital investment declined 8.7%.But Russia’s recession is far from over. A spate of economic data on Monday showed how dire the situation is: the economy shrank 3.7% last year, retail sales slumped more than 15% year-on-year in December, real wages fell 10% and capital investment declined 8.7%.
William Jackson, senior emerging markets economist at Capital Economics, said while the worst of Russia’s crisis has now passed, another year of recession looks likely.William Jackson, senior emerging markets economist at Capital Economics, said while the worst of Russia’s crisis has now passed, another year of recession looks likely.
UpdatedUpdated
at 7.44am GMTat 7.44am GMT
7.25am GMT7.25am GMT
07:2507:25
The root of the BOJ’s decision today to effectively charge banks for new deposits is the dire state of the Japanese economy.The root of the BOJ’s decision today to effectively charge banks for new deposits is the dire state of the Japanese economy.
Today’s inflation figures showed that prime minister’s Shinzo Abe’s much-heralded attempts to kickstart the economy after years of stagnation are failing – dubbed “Abenomics”.Today’s inflation figures showed that prime minister’s Shinzo Abe’s much-heralded attempts to kickstart the economy after years of stagnation are failing – dubbed “Abenomics”.
Prices are rising at just 0.5%, nowhere near the 2% Abe needs to lift Japan out of years of falling prices which have conditioned consumers to delay purchases in the expectation that things will eventually become cheaper.Prices are rising at just 0.5%, nowhere near the 2% Abe needs to lift Japan out of years of falling prices which have conditioned consumers to delay purchases in the expectation that things will eventually become cheaper.
For useful background, economics editor Larry Elliott wrote this analysis piece about Japan last year:For useful background, economics editor Larry Elliott wrote this analysis piece about Japan last year:
Related: Japan beats recession but the good news ends thereRelated: Japan beats recession but the good news ends there
7.11am GMT7.11am GMT
07:1107:11
It looks like being a decent start to the European trading day. FTSE forecast to rise 71 points at the opening.It looks like being a decent start to the European trading day. FTSE forecast to rise 71 points at the opening.
7.05am GMT7.05am GMT
07:0507:05
Investors and market experts have been caught out by the BOJ’s decision, which comes days after Kuroda said that the board was not considering negative rates.Investors and market experts have been caught out by the BOJ’s decision, which comes days after Kuroda said that the board was not considering negative rates.
Nicholas Smith, a strategist at CLSA based in Tokyo, told Reuters:Nicholas Smith, a strategist at CLSA based in Tokyo, told Reuters:
Kuroda had been saying that he didn’t think something like this would help so it is a bit surprising and it’s clear the market has been surprised by it.Kuroda had been saying that he didn’t think something like this would help so it is a bit surprising and it’s clear the market has been surprised by it.
But some felt it might not work very well because rates have been so low for long that banks have had plenty of opportunity to increase lending.But some felt it might not work very well because rates have been so low for long that banks have had plenty of opportunity to increase lending.
Martin King, co-managing director at Tyton Capital Advisors in Tokyo, said:Martin King, co-managing director at Tyton Capital Advisors in Tokyo, said:
This is an aggressive all-stick-no-carrot approach to spurring investment, as depositors are essentially penalised for holding cash.This is an aggressive all-stick-no-carrot approach to spurring investment, as depositors are essentially penalised for holding cash.
6.58am GMT6.58am GMT
06:5806:58
Kuroda: We have more policy ammunitionKuroda: We have more policy ammunition
Today’s steps don’t mean that we’ve reached limits to our [Japanese government bond] buying. We added interest rates as a new easing tool to our existing QQE framework.Today’s steps don’t mean that we’ve reached limits to our [Japanese government bond] buying. We added interest rates as a new easing tool to our existing QQE framework.
6.56am GMT6.56am GMT
06:5606:56
6.53am GMT6.53am GMT
06:5306:53
Kuroda on prospect for further easingKuroda on prospect for further easing
Justin McCurryJustin McCurry
Kuroda again:Kuroda again:
We won’t hesitate taking additional (easing) steps by (expanding) the quantity, quality of money, as well as through interest rate (cuts) if needed to achieve our price target, while scrutinising risks to the economy and prices.We won’t hesitate taking additional (easing) steps by (expanding) the quantity, quality of money, as well as through interest rate (cuts) if needed to achieve our price target, while scrutinising risks to the economy and prices.
6.50am GMT6.50am GMT
06:5006:50
Kuroda on price risks and rationale for negative ratesKuroda on price risks and rationale for negative rates
Justin McCurryJustin McCurry
Kuroda adds:Kuroda adds:
Japan’s economy continues to recover moderately and the underlying price trend is improving steadily. But there’s a risk recent further falls in oil prices, uncertainty over emerging economies, including China, and global market instability could hurt business confidence and delay the eradication of people’s deflationary mindset.Japan’s economy continues to recover moderately and the underlying price trend is improving steadily. But there’s a risk recent further falls in oil prices, uncertainty over emerging economies, including China, and global market instability could hurt business confidence and delay the eradication of people’s deflationary mindset.
The BOJ decided to adopt negative interest rates ... to forestall such risks from materialising.The BOJ decided to adopt negative interest rates ... to forestall such risks from materialising.
6.47am GMT6.47am GMT
06:4706:47
Justin McCurryJustin McCurry
Kuroda has told journalists in Tokyo that the decision to adopt negative interest rates was taken with the 2% inflation target in mind, and in consideration of risks to Japanese business confidence posed by factors that include concern over the health of the global economy.Kuroda has told journalists in Tokyo that the decision to adopt negative interest rates was taken with the 2% inflation target in mind, and in consideration of risks to Japanese business confidence posed by factors that include concern over the health of the global economy.
Kuroda refused to comment on Thursday’s resignation of the economy minister, Akira Amari, but added:Kuroda refused to comment on Thursday’s resignation of the economy minister, Akira Amari, but added:
As before, the aim is to see Abenomics succeed.As before, the aim is to see Abenomics succeed.
UpdatedUpdated
at 6.48am GMTat 6.48am GMT
6.44am GMT6.44am GMT
06:4406:44
Kuroda is working his way through the statement issued earlier by the Bank of Japan, according to our man in Tokyo, Justin McCurry.Kuroda is working his way through the statement issued earlier by the Bank of Japan, according to our man in Tokyo, Justin McCurry.
The decision sent the yen plunging by up to 2% as capital seeks higher rates of return elsewhere.The decision sent the yen plunging by up to 2% as capital seeks higher rates of return elsewhere.
Quite how long the yen’s fall will last remains to be seen however because persistent low rates in Japan has done little to discourage investors from ploughing money into the country’s markets, which are seen as safe haven.Quite how long the yen’s fall will last remains to be seen however because persistent low rates in Japan has done little to discourage investors from ploughing money into the country’s markets, which are seen as safe haven.
6.37am GMT6.37am GMT
06:3706:37
Bank of Japan governor Haruhiko Kuroda speaking nowBank of Japan governor Haruhiko Kuroda speaking now
Bank of Japan governor Haruhiko Kuroda is speaking now ...Bank of Japan governor Haruhiko Kuroda is speaking now ...
Updates shortly.Updates shortly.
6.32am GMT6.32am GMT
06:3206:32
Markets surgeMarkets surge
Stock markets in Asia Pacific have yo-yoed wildly in the wake of the BOJ move, which spells yet another round of monetary easing in Japan.Stock markets in Asia Pacific have yo-yoed wildly in the wake of the BOJ move, which spells yet another round of monetary easing in Japan.
Generally speaking, traders have embraced quantitative easing in its various forms across the globe as it means cheap money and rising asset prices.Generally speaking, traders have embraced quantitative easing in its various forms across the globe as it means cheap money and rising asset prices.
In Europe, shares are expected to open up strongly this morning, according to futures trading.In Europe, shares are expected to open up strongly this morning, according to futures trading.
6.18am GMT6.18am GMT
06:1806:18
Japanese inflation slowed to 0.5%Japanese inflation slowed to 0.5%
Earlier on Friday, official figures showed inflation in Japan was 0.5%, way off the bank’s target of 2%.Earlier on Friday, official figures showed inflation in Japan was 0.5%, way off the bank’s target of 2%.
The BOJ hopes that the rates decision will encourage commercial banks to lend more, rather than keeping cash at the BOJ, and stimulate investment and growth.The BOJ hopes that the rates decision will encourage commercial banks to lend more, rather than keeping cash at the BOJ, and stimulate investment and growth.
The BOJ’s statement added that Japan’s economy was still recovering but headwinds from volatile global financial markets could undermine confidence.The BOJ’s statement added that Japan’s economy was still recovering but headwinds from volatile global financial markets could undermine confidence.
The statement said:The statement said:
Japan’s economy has continued to recover moderately, with a virtuous cycle from income to spending operating in both the household and corporate sectors, and the underlying trend in inflation has been rising steadily.Japan’s economy has continued to recover moderately, with a virtuous cycle from income to spending operating in both the household and corporate sectors, and the underlying trend in inflation has been rising steadily.
Recently, however, global financial markets have been volatile against the backdrop of the further decline in crude oil prices and uncertainty such as over future developments in emerging and commodity-exporting economies, particularly the Chinese economy.Recently, however, global financial markets have been volatile against the backdrop of the further decline in crude oil prices and uncertainty such as over future developments in emerging and commodity-exporting economies, particularly the Chinese economy.
For these reasons, there is an increasing risk that an improvement in the business confidence of Japanese firms and conversion of the deflationary mindset might be delayed and that the underlying trend in inflation might be negatively affected.For these reasons, there is an increasing risk that an improvement in the business confidence of Japanese firms and conversion of the deflationary mindset might be delayed and that the underlying trend in inflation might be negatively affected.
6.11am GMT6.11am GMT
06:1106:11
The BOJ governor Haruhiko Kuroda will give a press conference in about 30 minutes which should help explain the thinking behind the decision, which sneaked through on a 5-4 vote of the bank’s board.The BOJ governor Haruhiko Kuroda will give a press conference in about 30 minutes which should help explain the thinking behind the decision, which sneaked through on a 5-4 vote of the bank’s board.
The BOJ said it was adopting an interest rate of -0.1% for new excess reserves parked at the bank by financial institutions.The BOJ said it was adopting an interest rate of -0.1% for new excess reserves parked at the bank by financial institutions.
The rate will not apply to existing deposits. Existing current account balances will earn a 0.1% positive interest rate. Required reserves held at the central bank by financial institutions will earn zero interest. Any additional current account deposits would incur the minus 0.1 percent rate, the BOJ said.The rate will not apply to existing deposits. Existing current account balances will earn a 0.1% positive interest rate. Required reserves held at the central bank by financial institutions will earn zero interest. Any additional current account deposits would incur the minus 0.1 percent rate, the BOJ said.
But the bank added:But the bank added:
The BOJ will cut the interest rate further into negative territory if judged as necessary.The BOJ will cut the interest rate further into negative territory if judged as necessary.
Read the full statement here.Read the full statement here.
UpdatedUpdated
at 6.14am GMTat 6.14am GMT
5.42am GMT5.42am GMT
05:4205:42
Opening summaryOpening summary
Hello and welcome to the business live blog. It’s been a very eventful night in the world of finance with Japan making the surprise (to some, at least) decision to adopt negative interest rates.Hello and welcome to the business live blog. It’s been a very eventful night in the world of finance with Japan making the surprise (to some, at least) decision to adopt negative interest rates.
More on the detail of the decision very shortly but here’s a catch-up on what has happened:More on the detail of the decision very shortly but here’s a catch-up on what has happened:
Read our news story from our correspondent in Tokyo, Justin McCurry:Read our news story from our correspondent in Tokyo, Justin McCurry:
Related: Bank of Japan shocks markets by adopting negative interest ratesRelated: Bank of Japan shocks markets by adopting negative interest rates
UpdatedUpdated
at 5.51am GMTat 5.51am GMT