Stocks Hold, Yen Rose as BoJ Wagers Increase – Europe Market Wrap

Global equities paused at record highs, while the yen surged as conviction grew that the Bank of Japan, the last of the major central banks, will begin hiking interest rates in March.

European markets were flat, while Nasdaq 100 contracts rose 0.3% after gains on Wednesday, when Federal Reserve Chair Jerome Powell signalled to lawmakers that policy easing is still on track to begin this year, despite his lack of urgency to begin rate decreases.

The yen surged as much as 1% versus the dollar as accelerated wage growth and words from a BoJ board member fueled anticipation that Japan’s sub-zero interest rates might rise for the first time since 2007. Tokyo’s Nikkei 225 index lost more than 1%, as the two-year government bond rate rose to its highest level since 2011.

The developments raised concerns that higher domestic interest rates may entice Japanese money that is currently parked in foreign markets to return home. The dollar fell 0.2% versus a basket of currencies, marking the fifth consecutive day of losses.

Investors are also looking for clues from the ECB about when it will begin decreasing interest rates. The bank is anticipated to keep interest rates unchanged at 4% on Thursday, and investors are now pricing in fewer than 100 BPS of movement, down from previous estimates.