Bank of Japan Doubles Down on QE

Economic Data

- (RU) Russia Central Bank (CBR) raised main rate by 150bps to 9.50%

- (IT) Italy Sept PPI M/M: 0.1% v 0.0% prior; Y/Y: -2.0% v -2.0% prior

- (BR) Brazil Sept PPI Manufacturing M/M: 0.9% v 0.5% prior; Y/Y: 2.9% v 2.5% prior

- (US) Sept Personal Income: 0.2% v 0.3%e; Personal Spending: -0.2% v +0.1%e

- (US) Sept PCE Deflator M/M: 0.1% v 0.1%e; Y/Y: 1.4% v 1.5%e

- (US) Sept PCE Core M/M: 0.1% v 0.1%e; Y/Y: 1.5% v 1.5%e

- (US) Q3 Employment Cost Index: 0.7% v 0.5%e

- (CA) Canada Aug GDP M/M: -0.1% v 0.0%e; Y/Y: 2.2% v 2.3%e

- (US) Oct ISM Milwaukee: 65.6 v 60.0e

- (US) Oct Chicago Purchasing Manager: 66.2 v 60.0e

- (US) Oct Final University of Michigan Confidence: 86.9 v 86.4e

- (MX) Mexico Central Bank (Banxico) left Overnight Rate unchanged at 3.00%

Just two days after the Fed ended its QE program, the BoJ surprised everybody this morning by greatly expanding its existing QE program, rocking global markets. The Nikkei gained 4.8% on the session and Nikkei futures continued rising after the close of cash trading. European indices surged higher and look to close at their highs, with both the CAC and the DAX up more than 2% a piece. The S&P500 retook 2000 in the premarket and the DJIA is at fresh all-time highs. As of writing, the DJIA is up 0.97%, the S&P500 is up 0.96% and the Nasdaq is up 1.34%.

Compounding the impact of the BoJ's big QE move, the Japanese public pension fund (GPIF) confirm that it would reduce its domestic debt allocation to 35% and hike its domestic stock allocation to 25%, and also raise its holdings of foreign bonds and equities. Note that the BoJ said it would increase holdings of government bonds by 80 trillion yen ($723 billion) and boost ETF purchases to 3 trillion yen. The yen plunged to a six-year low, with USD/JPY well above 112 as of writing. Yields on 10-year notes in Italy, Spain, Portugal and Greece slid at least five basis points. Spot gold is seeing its biggest sell-off in months, down 2.6% and trading at four-year lows around $1,166.

The BoJ was not alone in making big, unexpected moves this morning. At its scheduled policy meeting, the Russian central bank raised its main interest rate more than anticipated in its latest attempt to shore up the plummeting national currency. The bank lifted its main rate by 150 basis points to 9.5%, three times the expected increase. The ruble strengthened momentarily, however it headed back towards recent all-time lows around 43.40 within no time, and USD/RUB is around 43.00 as of writing.

Oil majors Exxon and Chevron are both up approximately 1% a piece this morning after reporting very good third-quarter numbers. EPS figures were well ahead of expectations and both firms saw modest y/y profit growth, as better returns in downstream operations made up for low oil prices upstream. CVX's revenue was less impressive, while Exxon widely beat revenue estimates. Exxon substantially dialed back production in the quarter, while CVX pumped slightly less.

Looking Ahead

- (NO) Norway, Netherlands sovereign debt ratings to be published

- 15:00 (AR) Argentina Sept Industrial Production M/M: No est v -1.3% prior; Y/Y: -2.5%e v -2.9% prior

- 20:00 (KR) South Korea Oct Trade Balance: $5.0Be v $3.4B prior; Exports Y/Y: 1.4%e v 6.9% prior (revised from 6.8%); Imports Y/Y: -1.3%e v +8.0% prior

- 21:00 (CN) China Oct Manufacturing PMI: 51.2e v 51.1 prior