Monday, April 27 brings an increase in major stock indices along with a broad improvement in market sentiment. Investors are counting more and more on loosening the restrictions associated with the expansion of the coronavirus, which in turn lowered the economy. The Bank of Japan has expanded its operations, and the Japanese government and the companies will be more supported.
At the Bank of Japan meeting today ended, it was decided to remove the restrictions on buying government bonds so that the yields of 10-year government bonds remained at 0%. What's more, the Bank of Japan has pulled corporate debt purchases from around 7 trillion yen to 20 trillion, joining other central banks in an unprecedented expansion of monetary stimulus to alleviate the economic effects of the COVID-19 pandemic. In addition, the central bank decided to purchase the ETF and REIT package so that their amounts outstanding will rise at an annual pace of JPY 12 trillion and about JPY 180 billion, respectively. Meanwhile, BoJ kept the key short-term interest rate unchanged at -0.1%. – according to the statement of the Bank of Japan.
In the stock market, investors are hoping to re-open the US economy and to make research on COVID-19 more widely available, as well as for drug production. Nevertheless, it seems that until concrete progress in medical areas occurs, further increases in the stock market may be limited.
A significant part of companies from the S&P 500 index increased by almost 27 percent above March 23 level. This, in turn, may be due to the hope that large fiscal and monetary support in the US is helping the economy, which has been hit by the lockdown. We will find out how big losses the epidemic caused in international reports after the publication of the quarterly GDP reading. Estimates presented for shrinking of the economy in the first three months of 2020 by over 4 percent.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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