A buoyant yen and oil prices at their lowest in three months kept stock markets on the defensive on Tuesday as investors awaited central bank meetings this week that will unveil new stimulus in Japan and may provide clues on U.S. interest rates.
U.S. equity markets fell while stocks in Europe traded slightly above break-even as gains in major healthcare and consumer goods stocks propped up European equities to offset persistent concerns over the region’s banking system.
The yen hit two-week highs against the euro and more than one-week highs against the dollar as traders dialed back expectations of how much new stimulus authorities will inject into Japan’s ailing economy at the end of the week.
Most economists surveyed by Reuters expect the Bank of Japan to expand its asset purchases and cut rates further below zero at a two-day meeting that ends on Friday.
Comments by Japan’s finance minister, Taro Aso, raised concerns that the government will not work as closely with the BOJ to implement new stimulus as investors had hoped.
“We are also seeing not much pressure from the Japanese government on the BOJ to ease. All this is helping the yen,” said Yujiro Goto, currency strategist at Nomura.
The yen JPY= gained 1.09 percent against the dollar to 104.61. The euro EURJPY= fell 1.37 percent to 114.91 yen.
MSCI’s all-country world stock index .MIWD00000PUS traded near break-even, while the pan-European FTSEurofirst 300 index .FTEU3 rose 0.2 percent to close at a provisional 1,348.04.