Glittering gold gives markets some Christmas cheer

Singapore — Asian stocks were trying get into a festive mood on Wednesday, and managed small gains with even Japan’s Nikkei lifting off a two-month low it hit after the Bank of Japan’s surprise decision to loosen its tight leash on government bond yields.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6%. Japan’s Nikkei was down 0.2%, paring earlier losses of around 1%. Gold miners in Australia led a 1.3% jump for the S&P/ASX 200.

Wall Street snapped a four-day losing streak overnight and S&P 500 futures rose 0.5% in Asia trade.

On Tuesday the Bank of Japan (BOJ) widened its trading band for 10-year government bond yields from 25 basis points (bps) either side of zero to 50 bps.

That triggered a leap in the yen, which had spent most of the year sliding because of Japan’s low yields, selling in Japan’s stock market and a sell-off for bonds around the world.

The resultant drop for the US dollar has spot gold prices testing six-month peaks and gold miners riding high. Newcrest rose 6% in Sydney and smaller names even more. Global miners BHP and Rio Tinto rose 2%.

Spot gold bought $1,816 an ounce.

“The tone is good, we’re having our little version of a Santa Claus rally,” said Damian Rooney, a dealer at Argonaut Securities in Perth, referring to typical late-December gains as markets drift towards the year end.

The yen mostly held on to large gains from Tuesday, at 132.09 per dollar, and traders were getting positioned for further dollar losses.

Some of the major drivers of dollar gains — an ever weaker yen, a struggling Chinese yuan and outsize rises in US yields — are starting to shift. The euro held at $1.0625, not far from last week’s six-month high.

Bond markets were kept under pressure as the last big central bank anchoring its bond market starts to loosen its iron grip on yields.

Benchmark 10-year Treasury yields rose four bps to a three-week high of 3.722%. Japanese 10-year yields rose 5.5 bps to 0.45%, close to the BOJ’s 0.5% ceiling.

Brent crude futures hovered at $80.24 a barrel

Reuters