Shares rally, yen slumps as BOJ ramps up stimulus
NEW YORK (Reuters) - Global equity markets rallied and the yen fell to a nearly seven-year low against the dollar on Friday after the Bank of Japan surprised financial markets by ramping up its massive economic stimulus program.
The unexpected jolt from the BOJ put the dollar on track for its biggest daily gain against the yen in 18 months, while driving gold and silver to their lowest since 2010.
Equity markets surged as the BOJ decision to buy more assets helped ease concerns about the end of the U.S. Federal Reserve's stimulus program and the European Central Bank's reluctance thus far to engage in large-scale bond-buying. [ID:nL4N0SQ041]
The BOJ's board voted 5-4 to accelerate its buying of government bonds, while tripling its purchases of exchange-traded funds and real-estate investment trusts.
Also, Japan's $1.2 trillion Government Pension Investment Fund announced new portfolio allocations that will double its holdings of domestic and foreign stock holdings.
"It's not just the (BOJ's) easing, but the asset allocation from the pension plan is of course also helpful," said Paul Zemsky, chief investment officer of multi-asset strategies and solutions at Voya Investment Management in New York.
"Economic growth (in the United States) is looking pretty good, earnings are good ... we will end the year certainly closer to 2,100 than 2,000 on the S&P 500."
MSCI's all-country world equity index rose 0.88 percent, while the FTSEurofirst 300 index of top European shares gained 1.84 percent, to close at 1,351.96. In Tokyo, the Nikkei stock index soared 4.8 percent.
On Wall Street, the Dow Jones industrial average hit a record intraday high and the benchmark S&P 500 came within one-tenth of 1 percent of its record peak.
The Dow Jones industrial average was up 146.23 points, or 0.85 percent, at 17,341.65. The Standard & Poor's 500 Index was up 16.50 points, or 0.83 percent, at 2,011.15. The Nasdaq Composite Index was up 51.09 points, or 1.12 percent, at 4,617.23.
The dollar surged past its Oct. 1 high of 110.09 yen, rising as far as 112.47 , its highest since December 2007. The greenback pared some gains to trade 2.76 percent higher at 112.21 yen, on course for its biggest gain since April 2013.
The euro jumped to a six-week high against the yen of 140.70 yen, and fell 0.65 percent to $1.2530 against the dollar.
The dollar index , a measure of the greenback against six major currencies, rose 0.86 percent at 86.884.
U.S. Treasury debt prices fell as investors moved away from safe-haven bonds and grew more optimistic about prospects for the world's largest economy.
Benchmark 10-year Treasury notes fell 9/32 in price to yield 2.3371 percent.
Brent for December fell 38 cents to settle at $85.86 a barrel. U.S. crude settled down 58 cents at $80.54.
Spot gold slid as much as 3 percent to its lowest since July 2010 at $1,161.25 an ounce in early trade. It was last down 2.45 percent at $1,169.20.
(Reporting by Herbert Lash; Editing by Dan Grebler and James Dalgleish)