Photographer: Tomohiro Ohsumi/Bloomberg

Charting the Markets: Kuroda Pulls a Rabbit Out of the Hat

Yen drops after Kuroda surprise, Italian stocks are Europe's laggards and oil gains for a fourth day.

Haruhiko Kuroda does it again. The Bank of Japan Governor surprised investors by not only loosening policy but introducing negative interest rates. The MSCI All Country World Index rose for a third day in four, bringing its decline for January to 7 percent. It's the worst monthly performance since May 2012. The value of global equities has now fallen by more than $7 trillion in 2016 as China struggles to stabilize its economy and financial markets.

The yen sank the most since October 2014 on the news from the BOJ, falling as much as 2 percent against the U.S. dollar. Only a week ago Kuroda said the central bank wasn't considering negative rates. 41 out of 42 economists in Bloomberg's survey expected the rate would remain at 0.10 percent, with one expecting it would be lowered to 0.05 percent. The yen has been a thorn in Kuroda's side in 2016, with haven flows lifting it by 1.2 percent ahead of today's announcement, hindering efforts to boost inflation. The BOJ today delayed its goal for reaching its 2 percent inflation target for the third time in less than a year. The Nikkei 225 Index finished the day 2.8 percent higher, after jumping more than 3 percent and plunging 1.6 percent in the half hour after the announcement. The nation's bond yields dropped to record lows.

Italy's FTSE MIB Index is rising along with its European peers and yet remains one of the world's worst-performing global benchmarks in January, falling 13 percent. Only six primary indices out of the 93 tracked by Bloomberg have fared worse. It's the worst month for Italian stocks since August 2011. Blame for the drop goes to the nation's banks. After much deliberation and uncertainty, Italy struck a deal with the European Union on Wednesday to clean up the industry's bad debts. Investors fear the plan, which allows lenders to offload soured loans after buying a state guarantee, is unlikely to clean up the financial system as fast as some had hoped. Banks are the worst performing industry group on the Stoxx 600 in 2016, sinking almost 17 percent.

Brent crude gave up half of its gains after Russia's Energy Minister told Bloomberg there's no confirmed meeting between OPEC and non-OPEC nations. Alexander Novak says a decision on cutting oil productionn is possible only if all crude exporting nations are in consensus. On Thursday oil jumped as much as 8 percent after Interfax cited Novak as saying that OPEC and other producers may meet to discuss output. Immediately four delegates from OPEC shot down the notion, saying no meeting has been planned. Brent crude is on track for its second weekly advance, the longest winning stretch in two months. It's rebounded 23 percent since it fell to a 12-year low of $27.88 on Jan.20. In 2016, oil has dropped 8 percent.

Mark Barton is a presenter on Bloomberg TV. Follow him on Twitter @markbartontv

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