Currency intervention helps yen; Stocks higher
LONDON - Global stocks rose Friday after the world's seven leading industrial nations moved to rein in the Japanese yen, whose surge to record highs this week was hurting a country already brought to its knees by natural disasters.
Oil prices, meanwhile, plunged after the Libyan government declared a cease-fire in its weeks-long clashes with rebel forces.
Investor confidence was first boosted by the coordinated effort to stabilize financial markets, which have been volatile since Japan was struck March 11 by a mammoth earthquake and tsunami that wiped out much of its industrial northeast and severely damaged a nuclear power plant.
The yen raced to record highs against the dollar due to its status as a safe haven for investors — even when the emergency is in Japan — and expected repatriation of funds for reconstruction.
The yen's rise was further hurting Japan's export-dependent economy by making its foreign sales less competitive, so much that the world's largest central banks joined forces to intervene in currency markets to bring it back down.
As a result, the benchmark Nikkei 225 in Tokyo rose 2.7 percent to close at 9,206.75, capping a turbulent week that saw stocks lose 16 percent over Monday and Tuesday.
In Europe, Britain's FTSE 100 rose 0.8 percent to 5,739.03. Germany's DAX was 1.2 percent higher at 6,735.41 and France's CAC-40 rose 1.6 percent to 3,844.97. The euro rose to $1.4129 from $1.4030 late Thursday.
Wall Street also rose on the open, with Dow Jones gaining 1.0 percent to 11,893 and the S&P 500 rising 0.9 percent to 1,285.
The G-7 coordinated currency intervention marks the first time the G-7 countries have jointly acted in currency markets since the fall of 2000, when they supported the fledgling euro.
The impact was immediate — the dollar rose above 81 yen after earlier in the day sliding as far as 76.53 yen, an all time low. It was trading at 81.06 yen in mid-afternoon in Europe.
Analysts noted that the G-7 left the door open for more interventions, as required by market volatility, suggesting a longer-term commitment to keeping the yen down.
Gareth Berry, analyst at UBS, said that while the size of the intervention was not revealed it is likely to be significant. The Bank of Japan's unilateral intervention in September was worth $25 billion on its own.
Meanwhile, oil prices slumped after the Libyan government declared a cease-fire, easing fears of an international military intervention. Earlier, the U.N. had authorized military action and a no-fly zone over Libya to prevent its leader, Moammar Gadhafi, from crushing a rebel movement.
Benchmark crude for April delivery fell $2 after Libya's announcement of a halt in fighting. At $100.75 a barrel it was down 67 cents from Thursday's close in electronic trading on the New York Mercantile Exchange. Investors remain wary of a spread in unrest to other larger oil producers, such as Saudi Arabia.
"Market participants will closely follow headline and event risk and we anticipate difficult trading conditions throughout all Friday sessions," Berry said.
Elsewhere in Asia, indexes ended higher. The Shanghai Composite Index rose 0.3 percent to 2,906.89 while the Shenzhen Composite Index for China's second, smaller exchange gained 0.6 percent to 1,292.93.
Shares in salt companies fell after surging the day before when consumers hoarded salt in Beijing and elsewhere in the false belief that it can guard against radiation exposure. Any fallout from the crippled Japanese nuclear power plant is extremely unlikely to reach China. Yunnan Salt & Chemical Industry Co. Ltd., which rose 10 percent on Thursday, lost most of those gains — nearly 8 percent
on Friday.
Hong Kong's Hang Seng rose marginally to 22,300.23 and South Korea's Kospi was up 1.1 percent to 1,981.13. Benchmarks in Singapore, Taiwan, New Zealand and Indonesia were also up, while Australia's S&P/ASX 200 dropped 0.1 percent to 4,555.30.
Asian indexes were helped by gains on Wall Street the previous day, when data suggested the U.S. economy is improving.
A gauge of manufacturing in the mid-Atlantic region jumped in February to the highest point since January 1984. The survey from the Federal Reserve's Philadelphia branch showed new orders soared. Production at U.S. factories, mines and utilities dipped last month but was higher in previous months than first estimated.
The U.S. Labor Department reported that the number of people applying for unemployment benefits fell more than economists expected last week. Ongoing claims dropped to the lowest level since October 2008.