19/03/2011
Dollar climbed nearly 3 percent to 80.95 yen
Euro rose 3.6 percent to 114.70 yen
Stocks rally on Libya cease-fire, G7 weakens yen
Global stocks rose on Friday after a Libya cease-fire reduced tension in the region and the Group of Seven intervened to break the yen’s rise, calming markets.
World shares as measured by MSCI advanced 0.8 percent, erasing some of the 5.6 percent drop over the past six trading days and bringing the index back to about even for 2011.
Oil fell from earlier highs after Libya declared a cease-fire in the country to protect civilians and comply with a UN resolution passed overnight.
“That (Mideast unrest) quieting down and Japan quieting down will lead to buying,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
Brent crude had surged above $117 a barrel on worries of escalating unrest in the region after the UN approved military action to contain Libya’s Muammar Qaddafi. Brent crude for May delivery slid $1.10, or 1 percent to $113.80 a barrel after the cease-fire. US crude fell 54 cents, or 0.5 percent, to $100.88.
The UN Security Council passed a resolution endorsing a no-fly zone for Libya. It authorized “all necessary measures” to protect civilians against Qaddafi’s forces.
The dollar climbed nearly 3 percent to 80.95 yen, retreating from a session high of around 82 yen, following the G7 announcement, which came just as Tokyo’s stock market opened.
The show of solidarity by the G7 major developed economies to support Japan through its biggest crisis since World War Two comes a day after the yen soared to a record 76.25 per dollar in chaotic trading. It is the first coordinated currency intervention by the G7 in a decade.
The G7 “is just helping sentiment, and stocks sensitive to risk will push on. But optimism is going to be guarded as there are no firm resolutions surrounding the Japanese nuclear crisis and the Middle East, and anything can happen on the weekend,” said Giles Watts, head of equities at City Index in London.
Financial stocks rose after the Federal Reserve notified some of the largest US banks that they passed a second round of stress tests. The central bank said it would let 19 of those banks use some of their massive capital cushions to buy back shares, repay the government and boost dividends.
JPMorgan Chase & Co and Wells Fargo & Co are among those planning dividend boosts. JPMorgan’s stock gained 3.2 percent to $45.97, while Wells Fargo shares added 1.8 percent to $31.94.
Industrial shares also rose on bets they could benefit in Japan’s rebuilding effort. General Electric Co rose 1.1 percent to $19.43, while Caterpillar advanced 2 percent to $105.18.
Before the US trading open, European equities pared earlier gains after China’s central bank raised lenders’ required reserve ratios. The FTSEurofirst 300 added 0.2 percent to close at 1,088.82.
Japan’s Nikkei share index climbed 2.7 percent, recouping some of the week’s losses as Japan reeled from the aftermath of an earthquake, tsunami and nuclear power plant crisis.
The euro rose 3.6 percent to 114.70 yen, after climbing to a session high of 115.50 yen earlier. Some traders noted the scale of intervention was so far a tame effort to stem the yen’s surge.
The euro rose to a four-month high of $1.4145 after the intervention in euro.yen.
Some market observers said even massive official selling might not restrain the yen for long, pointing to Japan’s last intervention in September 2010 when it sold a huge 2.1 trillion yen, or around $25 billion worth, but only managed to push the dollar up to 85.77 yen from 82.85 yen.
“It would need to be concerted and aggressive ... and even then I’m skeptical,” said Richard Wiltshire, a currency trader at ETX Capital in London.
A New York Federal Reserve spokesman said the US central bank had joined the G7 in intervening to weaken the yen.
Demand for the safety of government debt eased. A decline of 6/32 in the price of the benchmark 10-year US Treasury note pushed its yield up 0.02 percentage point to 3.28 percent.
Gold rose $13.75 to $1,416.10 an ounce, but was off a record around $1,444 hit last week.
