23 January 2013: Increased risk appetite drives global markets

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Asian shares edged higher on Wednesday as investors’ appetite for riskier assets improved. The MSCI-index for Asia-Pacific outside Japan reached a 17-and-a-half month high after recent positive data from United States and China improved investor sentiment. Revenue from the world’s largest internet research company Google’s core internet business outpaced analyst’s expectations pushing the stock 5% up. Google benefited from a new product listing during fourth quarter and business growth in international markets.

The Japanese yen is up for the second day after the monetary easing announced by Bank of Japan (BOJ) failed to meet market expectations. A US-Federal Reserve inspired aggressive bond buying was postponed to 2014. USD/JPY is trading at 88,50 down from its above 90 yen a dollar peak. BOJ’s 2% inflation target boosted, however, commodities and precious metals. BOJ’s move is seen as supportive for global economic recovery and boosted gold and silver as a hedge against rising prices.

The stronger yen had a negative impact on the Japanese stock market. BOJ’s delay of action disappointed exporters, and Japan’s benchmark Nikkei average fell 0,8%. Experts see a stronger yen as a technical correction to its rapid and sharp decline. After consolidation it is most likely that the yen would continue its downward trend. The yen has over the last two months declined from 81,69 to a bottom of 90,25. 95 yen against the dollar is seen as realistic. The fact that BOJ is joining other central banks to support growth is generally seen as positive for the global economy.

Euro/USD is steady above 1.33 level. The Euro was helped by better investor sentiment in Germany and by successful bond auctions in Portugal and Spain. Spain has succeeded to reach 14 percent of its 2013 funding target. GBP is still under downward pressure, USD/GBP is fighting to keep above the 1,50 level. Prime Minister David Cameron is today making his much awaited speech on UK’s relations to EU. It is expected that Cameron will offer a Euro critical British public a referendum on the EU if he is re-elected in 2015. The wording of his speech might have an impact both on the strength of the GBP and the future direction of the Euro.

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