NEW YORK (Reuters) - Global equity markets surged more than 1 percent and the yen fell to a nearly seven-year low against the dollar on Friday after the Bank of Japan surprised financial markets by ramping up its massive economic stimulus program.
The unexpected jolt from the BOJ led the dollar to post its biggest daily gain against the yen in 18 months, while driving gold and silver to their lowest since 2010.
The stronger dollar also pushed Brent crude to notch its steepest monthly decline, about 9 percent, since May 2012 as the oil benchmark traded below $85 a barrel for much of the session.
Equity markets surged as the BOJ decision to buy more assets helped ease concerns about the end of the U.S. Federal Reserve’s stimulus program and the European Central Bank’s reluctance thus far to engage in large-scale bond-buying.
The BOJ’s board voted 5-4 to accelerate its buying of government bonds, while tripling its purchases of exchange-traded funds and real-estate investment trusts.
Also, Japan’s $1.2 trillion Government Pension Investment Fund announced new portfolio allocations that will double its holdings of domestic and foreign stock holdings.
“It’s not just the (BOJ’s) easing, but the asset allocation from the pension plan is of course also helpful,” said Paul Zemsky, chief investment officer of multi-asset strategies and solutions at Voya Investment Management in New York.
“Economic growth (in the United States) is looking pretty good, earnings are good ... we will end the year certainly closer to 2,100 than 2,000 on the S&P 500.”
MSCI’s all-country world equity index .MIWD00000PUS rose 1.1 percent, while the FTSEurofirst 300 .FTEU3 index of top European shares gained 1.84 percent, to close at 1,351.96. In Tokyo, the Nikkei stock index .N225 soared 4.8 percent.
On Wall Street, both the Dow Jones industrial average and the S&P 500 index posted record closing highs, while the Dow also hit a record intraday high. In a late-day surge the S&P hit a peak just 1.08 points away from setting a new intraday high.
The Dow Jones industrial average .DJI closed up 195.1 points, or 1.13 percent, to 17,390.52. The S&P 500 .SPX gained 23.4 points, or 1.17 percent, to 2,018.05 and the Nasdaq Composite .IXIC rose 64.60 points, or 1.41 percent, to 4,630.74.
The dollar climbed as far as 112.47 yen JPY=, its highest since December 2007, for its best day since April 2013. The greenback pared some gains but still rose 2.87 percent to 112.33 yen.
The euro jumped to a six-week high against the yen EURJPY=R of 140.70 yen and fell 0.67 percent to $1.2528 EUR= against the dollar.
The dollar index .DXY, a measure of the greenback against six major currencies, rose 0.86 percent to 86.886.
U.S. Treasury debt prices fell as investors moved away from safe-haven bonds and grew more optimistic about prospects for the world’s largest economy.
Benchmark 10-year Treasury notes US10YT=RR fell 7/32 in price to yield 2.3317 percent.
Brent for December LCOc1 fell 38 cents to settle at $85.86 a barrel. U.S. crude CLc1 settled down 58 cents at $80.54.
Spot gold XAU= slid as much as 3 percent to its lowest since July 2010 at $1,161.25 an ounce in early trade. U.S. COMEX gold futures GCZ4 settled down 2.25 percent at $1,171.6.
Reporting by Herbert Lash; Editing by Dan Grebler and James Dalgleish