LONDON (Reuters) – The Bank of Japan's confirmation that it will maintain its extremely loose monetary policy for a long period of time pushed down the yen and global bond yields on Tuesday, despite growing concerns about the technology sector holding the world over stocks negative pressure.
An electronic chart showing the average Nikkei stock price looks at how market prices are reflected in a glass window on the Tokyo Stock Exchange (TSE) in Tokyo, Japan, February 6, 201
A The latest Reuters report that the BOJ could debate throttling its massive stimulus package had hurled Japanese bond yields at 1-1 / 2-year highs and into the Eurozone and US debt markets spread. This contributed to the yen deviating more than two percent from the lows of the past six months against the dollar in early July.
But while the BOJ announced some changes to its share purchase program and said its incentive plan would be more flexible, the changes did not show a tendency to shift radically from its accommodative stance.
10-year Japanese government bond yields <JP10YT = RR fell by 3 basis points and 40-year yields by nearly 9 basis points, pushing 10-year yields in the US and Germany down 2-3 basis points.
"The BOJ is important in terms of what they have not done," said Andrew Milligan, head of global strategy at Aberdeen Standard Investments in Edinburgh.
"It was disappointing for some investors who thought they would be more aggressive in their approach and the market reaction with lower yen and bond yields shows that many people's views are wrong."
Earnings in the Eurozone Later, prices rose again after data showed inflation above forecast, even though it was driven by higher energy costs. Separate data indicated that economic growth in the second quarter of 2018 was slower than expected.
The yen fell 0.4 percent to 111.2 yen per dollar. Many analysts now see easing to around 113, especially if the US Federal Reserve issues a restrictive interest rate message when its monetary policy session ends on Wednesday.
(For a chart above ¥ yen, bond yields fall on a dovish BOJ pledge.)
The dollar remained flat against a basket of currencies, but is expected to record a three-month earnings streak Markets will have more or more this year less priced in two Fed rate hikes. The greenback had gained more than 5 percent in the second quarter of 2018.
The BOJ's cautious promise, however, did not give shares a boost. Markets were buoyed by growing concerns about the global technology sector, which seemed relatively insensitive to trade tensions between the United States, Europe and China.
Netflix's and Facebook's lackluster profits have led to losses across the technology sector, with the Wall Street tech index slipping 6 percent over the last three sessions.
(For a chart about 'FAANGs Lose Bite?' Click Reut.rs/2KeglF)
That drove world stocks down to one-week lows and even Japan's Nikkei could not cling to earlier BOJ-backed gains. MSCI's index of Asia-Pacific Tech shares fell nearly one percent.
European technology followed suit, losing 0.6 percent, trailing broader stocks that remained unchanged that day.
Wall Street was ready for a tighter disclosure and futures signals that investors are waiting for the profits of Apple's largest company, iPhone maker, in the second quarter.
But the tech retreat has overshadowed an otherwise buoyant US earnings season, with average earnings growth of 22.6 percent and 83 percent of companies that have surpassed consensus estimates so far.
Milligan attributed the setback to a revaluation of stock prices and profit taking in the summer rather than a fundamental loss of confidence in the sector. World stocks would still trade the best monthly returns since January at the end of July.
World stocks on best month since Jan reut.rs/2K7PvFV
"The market says that these prices are fairly valued, so we wait for the next big story". This will either go down with the trade tensions in the fall or it could be positive if the Chinese stimulus is bigger than expected, "added Milligan.
He referred to Beijing's announcements and provided more tax incentives to impact US dollar tariffs and incentives for banks to lend to small businesses.
Markets are now waiting for the Fed's monetary policy statement to see if the expected two rate hikes are set for the remainder of 2018 In the UK, a 25bps rate hike is expected Thursday on Thursday despite the UK's economic weakness.
The British pound has already priced in the price, said David Riley, chief investment officer at BlueBay Asset Management, and added, "I think they'll make it but it will be one. "
The pound strengthened 0.2 percent to around $ 1.3159 after the 10-month lows of $ 1.2955 were exceeded in early July.
Additional coverage by Swati Pandey in Sydney and Ritvik Carvalho in London; Editing by Jon Boyle and Hugh Lawson