GLOBAL MARKETS-BoJ to buy assets, S&P 500 sets new 5-year high

Tue Jan 22, 2013 10:04pm GMT

* Bank of Japan makes open-ended commitment to buy assets
from 2014
    * BoJ doubles inflation target to 2 percent
    * Euro rises versus dollar; German investor sentiment up
sharply in January


    By Ellen Freilich
    NEW YORK, Jan 22 (Reuters) - The yen rose against the dollar
and euro on Tuesday after the Bank of Japan said its open-ended
commitment to buy assets would kick in only next year, but the
prospect of more monetary accommodation by a central bank
appeared to lend support to a broad range of financial assets,
including stocks, gold and oil.
    Analysts said the yen's rise would likely be short-lived and
that on a medium-term basis, it would weaken.
    The euro benefited from a surprisingly sharp jump in
investor sentiment in Germany. Analysts said, however, that the
currency's recent climb could put the euro zone at a competitive
disadvantage when its economy needs to grow.
    Hopes that the global economy would improve allowed cyclical
sectors to lead the Standard & Poor's 500 to a five-year high.
    Investors waited for earnings results from technology
companies due after the closing bell and were not disappointed.
    IBM reported fourth-quarter earnings and revenue
that beat analysts' forecasts and Google Inc
 said net revenue in its core Internet business
increased more than 20 percent in the fourth quarter.
    Shares of Google were up roughly 4.5 percent at $734.46 in
after-hours trading.   
    "Especially with the lull in economic data this week,
earnings will be a big driving force for equities this week,"
said Jonathan Garber, macro analyst at Briefing.com in Chicago.
    A catalyst from positive earnings results is needed for
stocks to move still higher, he said, while mixed earnings with
"lower guidance" would make another upward move more difficult.
    Signals that Republican leaders in the U.S. House of
Representatives would pass a nearly four-month extension of the
U.S. debt limit were also helpful for riskier assets.
    Global stock markets were mixed. Japanese equities 
and world indices rose on the BoJ news, but European shares fell
on a potential price war in French telecommunications.
    The euro pared sharp losses against the yen and 
the dollar after a German ZEW survey showed economic
sentiment at its highest since May 2012. 
    Front-month Brent crude oil futures rose 71 cents to
settle at $112.42 a barrel, supported by Bank of Japan plans for
asset buying and strong investor confidence data from Germany
.
    Gold rose as the Bank of Japan's pledge to launch an
economic stimulus effort and a five-year high in U.S. equities
prompted nervous investors to buy gold. Spot gold was up
0.1 percent at $1,691.24 an ounce by 3:29 p.m. EST (2029
GMT). 
    Japan's central bank, under intense political pressure to
overcome deflation, doubled its inflation target to 2 percent.
 The BoJ also said it had decided to switch to an
open-ended approach to buying assets each month next year,
setting no deadline for completing the purchases.  
    "The yen strengthened after weakening since mid-November in
anticipation of the BoJ's plan," Garber said.
    Though the yen appreciated on Tuesday, Omer Esiner, chief
market analyst at Commonwealth Foreign Exchange in Washington,
said its medium-term trend downward was intact.
    Current BoJ Governor Masaaki Shirakawa's term ends in April 
and since he is expected to be replaced by someone whose stance
on aggressive policy easing matches that of Prime Minister
Shinzo Abe, markets expect the yen to weaken.
    
   
    On Tuesday, however, the dollar slipped against the yen to
88.68.
    The euro was down 1.3 percent on the day at 117.78 yen, 
though off a session low of 117.31 yen. The euro was hurt by a
German newspaper report saying Germany's regulator had ordered
large banks to simulate a break-up. 
    Against the dollar, the euro was down 0.1 percent at $1.3300
. 
    The euro hit a near 10-month high a week ago and some
strategists said it would likely stay firm as concerns around
the euro zone crisis ease. Supporting that view was a
surprisingly strong German ZEW reading on investor sentiment, a
sign the euro zone crisis was no longer hitting Europe's largest
economy as hard as it did last year. 
    But Douglas Cote, chief market strategist at ING U.S.
Investment Management, with $170 billion in assets under
management, said the euro's rise since the start of the year
could pose a problem for the euro zone and the global economy.
    "Europe has a growth crisis," he said. "Their currency is
rising at the absolute worst possible time, hurting its global
competitiveness."
    U.S. housing data has surprised on the positive side over
the last few months, but news that U.S. existing home sales fell
in December temporarily weakened stock prices. It also allowed 
safe-haven U.S. debt to erase early losses and edge higher.
    The benchmark 10-year Treasury note rose 1/32, leaving its
yield at 1.84 percent, slightly lower than 1.85 percent at the
close on Friday.
    The Dow Jones industrial average rose 62.51 points,
or 0.46 percent, at 13,712.21. The Standard & Poor's 500 Index
 was up 6.58 points, or 0.44 percent, at 1,492.56. The
Nasdaq Composite Index was up 8.47 points, or 0.27
percent, at 3,143.18. 
    European shares, testing two-year highs in recent days,
weakened. Telecom shares slipped after Vivendi's SFR
mobile operator said it was cutting prices by as much as 25
percent. 
    The pan-European FTSEurofirst 300 closed down 0.1
percent at 1,165.49. 
    Frankfurt's DAX fell as much as 1.4 percent on the
talk but then erased about half of that loss.
    The MSCI world index was up 0.26 percent.