Global shares pull back amid hopes on US strength

New York: World shares advanced Wednesday, with Japan’s benchmark Nikkei-225 index closing 1.2 per cent higher after a Bank of Japan (BoJ) official suggested the central bank would refrain from raising interest rates, while markets are unstable.

Germany’s DAX added 1.2 per cent to 17,564.39, as an increase in factory output in June offset concern over weaker-than-expected exports. The CAC 40 in Paris gained 1.4 per cent to 7,230.21. In London, the FTSE 100 was 0.9 per cent higher at 8,089.70. The future for the S&P 500 jumped 1 per cent and that for the Dow Jones Industrial Average rose 0.7 per cent. The Nikkei index bounced during the day, but ultimately gained more than 400 points to close at 35,089.62. It soared more than 10 per cent on Tuesday, recovering a large share of the losses it suffered Monday, its worst day since 1987.

The gains followed remarks by a Bank of Japan official who noted that even though the central bank had raised interest rates a week earlier, to 0.25 per cent from 0.1 per cent, monetary policy remains lax. The interest rate hike, however modest, set in motion a domino effect of selling by traders to adjust to higher costs for carry trades — a favorite trade for hedge funds and other investors — due to higher interest rates and a rise in the value of the Japanese yen against the US dollar. That accentuated the scale of the declines, especially in Tokyo.