PFM Trading: Japan’s Topix has its biggest daily gain since 2008 on hopes Bank of Japan will ramp up stimulus.
PFM Trading says Japanese equities rallied after a week of steep losses on the TOPIX and the Nikkei 225. The Topix logged its biggest gain in over 7 years driven by investor speculation that stocks had been oversold last week and a report from the Cabinet Office which showed the Japanese economy contracted by an annualized 1.4% in the final three months of 2015.
The Topix jumped 8% to end the day at 1,292.23 after suffering a plunge of 13% last week while the Nikkei 225 rose 7.2% to close at 16,022.58 helped by a weakening in the yen.
According to analysts at the Shenzhen, China-based broker-dealer, the GDP data raised the likelihood of the Bank of Japan stepping up its stimulus program despite a growing sense that QE has been ineffective.
Edward Gold, VP at PFM Trading said he expected more see-sawing in the coming days as investors swung between bullishness and bearishness. “The news on the economy was disappointing for the Bank of Japan. It’s spent the last three years creating billions of yen out of thin air to buy JGBs, corporate bonds and ETFs in order to create this 2% inflation but the economy’s more or less in exactly the same place it was back then. Only shareholders and those invested in risk assets have benefited – the ordinary consumer or business owner remains as challenged as ever,” he said.
PFM Trading reaffirmed its long-term bullishness on Japan adding that it was confident the next round of monetary stimulus from the BoJ would come during February.
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