BoJ sparks global gains

Despite being a public holiday in Malta, to commemorate Independence Day, it was business as usual on Wednesday for the rest of the world. Stocks in Asia rose and set the tone for a day of gains after the Bank of Japan fired up traders around the world.

That upbeat sentiment spread to Europe, with stocks rising, led by financial shares after the BoJ tweaked monetary policy to favour yield-dependent businesses. US stocks were also higher, as traders awaited the US Federal Reserve announcement later on in the day keeping the key interest rate unchanged.

Ahead of the European market opening, Japan’s central bank announced that it was abandoning its target to increase the monetary base, launching yield curve controls and scrapping its bond buying range – but left rates unchanged.

The BoJ said it would keep its key interest rate steady at minus 0.1%, but also that it would expand its monetary base until inflation stabilised above 2%. It also announced it will aim to guide the yield on 10-year Japan government bonds to zero as part of its effort to steepen the yen yield curve.

The effort to steepen the yield curve was embraced by buyers of bank stocks, since financial institutions typically borrow on short-term rates and lend money on longer-term and higher rates. This sent bank shares soaring, with Barclays rallying 3.5% after HSBC raised its price target on the stock. Other banks were also trading in the green, with Lloyds, Standard Chartered and Royal Bank of Scotland all well into positive territory.

Staying in the banking sector, shares of Unicredit were sharply higher after Reuters reported that three bidders have emerged as the main contenders to buy the Italian lender’s fund management arm.

Elsewhere, shares in FedEx soared after the company reported adjusted quarterly profit that came in about estimated. FedEx also raised its full-year guidance on better-than-expected performance in all its units, sending shares up over 3%.

Oil prices jumped 2% on Wednesday after a surprisingly large drop in US crude inventories, and as an oil services workers strike in Norway threatened to cut North Sea output. Brent crude was up, and Crude futures climbed to trade near the $45-a-barrel mark.

Later on Wednesday, the US Federal Reserve became the focus for market attention, although no fireworks are expected from the US central bank this month.