LONDON: A lack of fresh stimulus from the Bank of Japan sent the yen soaring and world stocks into the red on Thursday, half a day after the US Federal Reserve signalled it too was hitting the policy pause button.
The yen surged almost 3 percent against the dollar, the euro and sterling in a sharp reaction to the BoJ inaction, putting it on course for its biggest jump against the greenback since February and in five years against the two European currencies.
Markets were also readying for one of the biggest bits of data of the year so far, the US first quarter gross domestic product reading scheduled for 8:30 a.m. ET (1230 GMT).
Tokyo's Nikkei slumped 3.6 percent, the pan-European FTSEurofirst 300 was down over 1.2 percent and futures markets pointed to Wall Street losing as much as 0.8 percent when it reopens.
The BoJ's decision to hold steady in the face of soft global demand and a sharp rise in the yen was particularly jarring for markets after media reports ahead of the meeting had said it wanted to go deeper into negative interest rates.
On the key element of the speculation, applying sub-zero rates to the BoJ's main bank lending programme, governor Haruhiko Kuroda spelled things out clearly.
"I know such a programme is adopted by the ECB (European Central Bank). At this stage, we don't have any plans to consider this option. This wasn't discussed at today's meeting," he said.
For analysts, the combination of the BOJ's sit-and-wait message and the signal from the Fed on Wednesday that is no rush to raise rates again, fed a broader shift in sentiment that has been gathering momentum since the start of the year.
"The market was expecting something from the BOJ and they did not deliver so the market has basically wiped out all the rally in dollar/yen," said Societe Generale FX strategist Alvin Tan.
"For the last two to three years the big theme in the market was monetary divergence. But in the last few months the legs have really been cut off that so currencies are all over the place."
The New Zealand dollar also raced up in the currency markets, rallying almost 2.5 percent after the Reserve Bank of New Zealand (RBNZ) also wrongfooted traders by skipping a chance to cut rates again.
GOLD SHINES
The latest Reuters poll suggests US first quarter GDP probably rose at a 0.7 percent annual rate, half the pace of the 1.4 percent of the final three months of 2015.
Back in Europe, disappointing earnings from plane maker Airbus and Spain's second biggest bank BBVA as well as a first quarter loss from Norway's giant sovereign wealth fund, added to gloom on stocks markets.
But euro zone consumer confidence and German unemployment readings came in better than expected and the head of Volkswagen said its recent sales were a reason for optimism after its emissions scandal.
In bond markets, the flight from the volatility elsewhere and the growing sense that US rates are staying put for a good while longer, overcame the Japanese angst to push benchmark Bund and Treasury yields lower.
In a statement that largely mirrored the one after its last meeting in March, the Federal Reserve rate-setting committee flagged an improving US labour market but acknowledged that economic growth seemed to have slowed.
"The Fed didn't mention June at all, meaning that if they skip that, it will be September which is close to the election, so we are talking December now," said Soeren Moerch, head of fixed income trading at Danske Bank. "That is a very big relief for fixed income markets."
Commodity markets, meanwhile, were having a remarkably quiet day by recent standards. Brent crude barely budged from 2016 highs hit on Wednesday at $47.19 per barrel as US West Texas Intermediate (WTI) hovered at $45.30 a barrel. Oil has surged 65 percent since mid-January.
Gold reversed overnight losses to climb to $1,255 an ounce, its highest in a week as traders took advantage of the fall in the dollar, the shiny stuff's underlying currency.
"The longer the Fed holds off on raising rates, the better for gold," said HSBC analyst James Steel.
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