SYDNEY Asian share markets went up Thursday after Britain's central bank launched an emergency bond buying programme to try to calm a furious sell-off in gilts, even though trade was skittish and sterling was under pressure.
The Bank of England said it will buy up to 5 billion $5.4 billion of government bonds a day until Oct. 14. It spent about a billion pounds on Wednesday and 30 year gilt yields fell 105 basis points, the biggest drop since Refinitiv records dating back to 1992.
The move buoyed sterling and gave a salve to a fractious mood in markets, but by mid-morning in Tokyo the pound was struggling for support and down 0.6 per cent to $1.0818.
The broadest index of Asia-Pacific shares outside Japan was up 1.5 per cent and eyeing its best session in a month, according to the broadest index of Asia-Pacific shares of MSCI. Japan's Nikkei rose by 0.9 per cent.
Finn Robinson, an ANZ economist, said it was a mess.
How long will the calm and fresh optimism last? This re-stimulation will lift, not quell UK inflation, and that's bad for bonds and sterling. The fallout from unfunded tax cuts announced in Britain last week has reverberated across financial markets after a collapse in British asset prices. The BoE intervention followed steps in Korea, India and Indonesia to normalize their financial markets this week as the U.S. dollar rallied broadly.
The benchmark 10 year yields, which had pipped 4 per cent a day ago, were down more than 20 bps to sit at 3.7472 per cent, as the US Treasuries rebounded in sympathy with gilts overnight.
Wall Street rallied, with the S&P 500 snapping a six day losing streak to surge nearly 2 per cent.
The mood gave pause to the U.S. dollar's march higher and the dollar index had its worst session in 2 -- 1 2 years as the dollar recoiled from lofty heights. It was soon trading firmly in Asia on Thursday.
The dollar index went up 0.1 per cent to 113.12, which is within striking distance of Wednesday's 20 year high of 114.78. The euro fell by 0.5 per cent to $0.9695.
The Australian dollar gained a bit of a lift on Thursday and traded just above $0.65 after a new data series from the statistics bureau showed high inflation readings for July and August.
Oil and gold made gains that were held into the Asia day because of the dollar's pullback. Brent crude futures rose by 0.2 per cent to $89.50 a barrel. Spot gold was steady at $1,656 an ounce.