Germany's high-stakes federal election is scheduled for Sunday. European stock markets are pricing in a near-perfect result. However, the risk is that investors may be more vulnerable to unpleasant surprises from the election outcome. <o:p></o:p>The German benchmark DAX index and other European stock indices have set new records repeatedly this year. That is largely driven by hopes that the next German administration would have a strong parliamentary majority and implement long-overdue reforms to revive the economy.<o:p></o:p>
<h2 class="MsoNormal">European shares break record highs<o:p></o:p></h2>
The German stock index has outperformed the US and European peers since the snap election was called. However, some analysts warn of the risks of betting on a definite outcome or underestimate the likelihood of market volatility. <o:p></o:p>Last year's surprise European parliament elections, which toppled the French government and led to a deep sell-off in markets, is a fine example of uncertainty.<o:p></o:p>
Daniel Murray, deputy chief investment officer at EFG asset management, said, "There is a clear risk that the outcome isn't as market friendly as is currently expected." He added, "If there's anything we've learned with regard to election outcomes, it's that they've become much less predictable."<o:p></o:p>
The German election has given investors hope that the new government will likely relax its tight borrowing restrictions. Friedrich Merz, the Christian democrat chancellor candidate, is leading in opinion polls and has shown a willingness to move away from the 'debt brake.' However, he has emphasised that Germany must first reduce bureaucracy and spending before contemplating further debt. A coalition including his party's alliance with either the social democrats or the greens &mdash; both advocates of increased borrowing &mdash; is regarded as the most market-friendly scenario.&nbsp;Investors will keep a close eye on the election outcome amidst a broader market risk of Trump's trade tariffs.<o:p></o:p>
(With the inputs from the agencies)<o:p></o:p>

Business & Economy: European stock markets are pricing in a near-perfect result. However, the risk is that investors may be more vulnerable to unpleasant surprises from the election outcome.

Germany's high-stakes federal election is scheduled for Sunday. European stock markets are pricing in a near-perfect result. However, the risk is that investors may be more vulnerable to unpleasant surprises from the election outcome. The German benchmark DAX index and other European stock indices have set new records repeatedly this year. That is largely driven by hopes that the next German administration would have a strong parliamentary majority and implement long-overdue reforms to revive the economy. European shares break record highs The German stock index has outperformed the US and European peers since the snap election was called. However, some analysts warn of the risks of betting on a definite outcome or underestimate the likelihood of market volatility. Last year's surprise European parliament elections, which toppled the French government and led to a deep sell-off in markets, is a fine example of uncertainty. Daniel Murray, deputy chief investment officer at EFG asset management, said, "There is a clear risk that the outcome isn't as market friendly as is currently expected." He added, "If there's anything we've learned with regard to election outcomes, it's that they've become much less predictable." The German election has given investors hope that the new government will likely relax its tight borrowing restrictions. Friedrich Merz, the Christian democrat chancellor candidate, is leading in opinion polls and has shown a willingness to move away from the 'debt brake.' However, he has emphasised that Germany must first reduce bureaucracy and spending before contemplating further debt. A coalition including his party's alliance with either the social democrats or the greens — both advocates of increased borrowing — is regarded as the most market-friendly scenario. Investors will keep a close eye on the election outcome amidst a broader market risk of Trump's trade tariffs. (With the inputs from the agencies)

German election risk to record high European stocks

Despite a contraction in Germany's GDP, the DAX index climbs to a record high, boosted by strong Adidas performance as European stocks rise.

Germany's DAX rises despite GDP contraction, Adidas drives record high

Residents of the purpose-built village near Dax in southwestern France shop for groceries, get pampered at the hair salon and enjoy music recitals just like anyone else. This is, however, no gated community for the general public. Each one of the 105 permanent residents has Alzheimer's disease.

Inside French village constructed for Alzheimer's patients

A knife attacker stabbed eight people on the street in Russia&#39;s far northern city of Surgut before being shot by police, investigators said Saturday.

The male attacker &quot;carried out attacks on passers-by, causing stab wounds to eight&quot; while &quot;moving along central streets of the city&quot; at around 11:20 am local time (0620 GMT) said Russia&#39;s Investigative Committee, which probes major crimes.

It said that armed police then arrived and used their weapons on the attacker and &quot;liquidated&quot; him.

The incident took place in a city some 2,100 kilometres (1,330 miles) northeast of Moscow in the oil-rich Khanty-Mansi region.

Two of those stabbed are in a serious condition while five more are in a stable condition, the government of the Khanty-Mansi region said in a statement, calling the attacker so far &quot;unidentified&quot;.

It called for calm over the incident, saying that &quot;in the interests of public calm and also of the investigation, citizens and media are recommended to use reliable information in assessing the situation until all the circumstances are established&quot;.&nbsp; 
&nbsp;

Asian stocks advanced on Friday, once again shrugging off a sluggish day on Wall Street

A knife attacker stabbed eight people on the street in Russia's far northern city of Surgut before being shot by police, investigators said Saturday. The male attacker "carried out attacks on passers-by, causing stab wounds to eight" while "moving along central streets of the city" at around 11:20 am local time (0620 GMT) said Russia's Investigative Committee, which probes major crimes. It said that armed police then arrived and used their weapons on the attacker and "liquidated" him. The incident took place in a city some 2,100 kilometres (1,330 miles) northeast of Moscow in the oil-rich Khanty-Mansi region. Two of those stabbed are in a serious condition while five more are in a stable condition, the government of the Khanty-Mansi region said in a statement, calling the attacker so far "unidentified". It called for calm over the incident, saying that "in the interests of public calm and also of the investigation, citizens and media are recommended to use reliable information in assessing the situation until all the circumstances are established".

Asia stocks resilient, dollar up before Yellen, Draghi speeches

World stocks hit a 19-month high on Wednesday, lifted by strong Japanese trade data, stellar European company earnings and hope that US&nbsp;President Donald Trump will press ahead with a large fiscal spending package.

Spanish bank Santander was among the big gainers in Europe, its 4 per cent rise in 2016 net profit giving its share price a similar boost and leading the continent-wide rally in bank stocks.

MSCI&#39;s global share index rose 0.2 per cent to 433.59 points, its highest since June 2015, after two of Wall Street&#39;s main indices reached fresh peaks overnight.

Europe&#39;s index of 300 leading shares and Germany&#39;s DAX both rose 1 per cent and Britain&#39;s FTSE 100 was up 0.7 per cent.

Japan&#39;s Nikkei advanced 1.4 per cent, buoyed by data showing the country&#39;s exports rose for the first time in 15 months in December, a positive sign for the economy even as talk of US&nbsp;protectionism looms over the outlook.

US&nbsp;futures pointed to a higher open on Wall Street. On Tuesday the S&amp;P 500 and Nasdaq both rose to fresh record highs and the Dow Jones Industrials came within 51 points of the elusive 20,000 mark.

&quot;US&nbsp;stocks have shown renewed signs of life this week, as the market toyed with the idea of reigniting the &#39;Trump rally&#39; that we saw in the aftermath of the presidential election,&quot; said Kathleen Brooks, research director at City Index.

Trump signed two executive orders on Tuesday to move forward with construction of the Keystone XL and Dakota Access oil pipelines, rolling back key Obama administration environmental actions in favour of expanding energy infrastructure.

He also met chief executives of the Big Three US&nbsp;automakers to push for more cars to be built in the United States.

&quot;Wednesday&#39;s key theme is the return of the &#39;Trump trade&#39;,&quot; Brooks said.

Bond yields up

The dollar snapped its recent losing streak and Treasury yields firmed overnight as Trump shifted his focus back to growth initiatives including promising corporate tax breaks to fuel US&nbsp;investment, after focusing on protectionism in his first few days in office.

The 10-year yield inched up to 2.48 per cent, recovering from its dip below 2.40 per cent earlier in the week, while the two-year yield held firm at 1.23 per cent. It was as low as 1.14 per cent on Monday.

While the greenback moved in tandem with the snap back in US&nbsp;Treasury yields overnight, it struggled to make much headway in Asian and European trading.

Lingering concerns about growing protectionism from the Trump administration&nbsp;and the potential negative effects on global trade and growth remained close to the surface.

&quot;It has kept dollar/yen flat despite the S&amp;P 500 hitting new highs and Treasury yields edging up,&quot; Kit Juckes, head of FX research at Societe Generale in London, wrote in a note on Wednesday.

&quot;There&#39;s no doubt that a major bout of protectionism-induced risk aversion would be yen-supportive, as well as negative for a bunch of currencies that depend on US&nbsp;trade,&quot; he said.

The dollar slipped 0.1 per cent to 113.65 Yen, and 0.1 per cent against a basket of currencies. The Euro was unchanged at $1.0725, little moved by a surprise fall in German business morale this month.

Germany&#39;s 10-year Bund yield rose to a six-week high of 0.38 per cent and France&#39;s benchmark 10-year yield hit a one-year high of 0.95 per cent, with bond prices weighed down by the rally in stocks and new debt supply.

Sterling was steady at $1.2524 after Britain&#39;s Supreme Court ruled that the government would need approval from parliament before formally triggering the country&#39;s departure from the European Union.

The decision overall was seen as clearing the way for Prime Minister Theresa May to get on with launching Brexit talks. Sterling has bounced 4 per cent over the last week.

Oil prices gave back much of their overnight gains. Brent futures dipped 0.5 per cent to $55.13 per barrel, after rising 0.4 per cent overnight.

Renewed optimism over Trump&#39;s growth policies took the wind out of a recent rally in safe-haven gold, which fell 0.6 per cent to $1,201 per ounce.

(Reuters)

Europe's index of 300 leading shares and Germany's DAX both rose 1 per cent and Britain's FTSE 100 was up 0.7 per cent

World stocks hit a 19-month high on Wednesday, lifted by strong Japanese trade data, stellar European company earnings and hope that US President Donald Trump will press ahead with a large fiscal spending package. Spanish bank Santander was among the big gainers in Europe, its 4 per cent rise in 2016 net profit giving its share price a similar boost and leading the continent-wide rally in bank stocks. MSCI's global share index rose 0.2 per cent to 433.59 points, its highest since June 2015, after two of Wall Street's main indices reached fresh peaks overnight. Europe's index of 300 leading shares and Germany's DAX both rose 1 per cent and Britain's FTSE 100 was up 0.7 per cent. Japan's Nikkei advanced 1.4 per cent, buoyed by data showing the country's exports rose for the first time in 15 months in December, a positive sign for the economy even as talk of US protectionism looms over the outlook. US futures pointed to a higher open on Wall Street. On Tuesday the S&P 500 and Nasdaq both rose to fresh record highs and the Dow Jones Industrials came within 51 points of the elusive 20,000 mark. "US stocks have shown renewed signs of life this week, as the market toyed with the idea of reigniting the 'Trump rally' that we saw in the aftermath of the presidential election," said Kathleen Brooks, research director at City Index. Trump signed two executive orders on Tuesday to move forward with construction of the Keystone XL and Dakota Access oil pipelines, rolling back key Obama administration environmental actions in favour of expanding energy infrastructure. He also met chief executives of the Big Three US automakers to push for more cars to be built in the United States. "Wednesday's key theme is the return of the 'Trump trade'," Brooks said. Bond yields up The dollar snapped its recent losing streak and Treasury yields firmed overnight as Trump shifted his focus back to growth initiatives including promising corporate tax breaks to fuel US investment, after focusing on protectionism in his first few days in office. The 10-year yield inched up to 2.48 per cent, recovering from its dip below 2.40 per cent earlier in the week, while the two-year yield held firm at 1.23 per cent. It was as low as 1.14 per cent on Monday. While the greenback moved in tandem with the snap back in US Treasury yields overnight, it struggled to make much headway in Asian and European trading. Lingering concerns about growing protectionism from the Trump administration and the potential negative effects on global trade and growth remained close to the surface. "It has kept dollar/yen flat despite the S&P 500 hitting new highs and Treasury yields edging up," Kit Juckes, head of FX research at Societe Generale in London, wrote in a note on Wednesday. "There's no doubt that a major bout of protectionism-induced risk aversion would be yen-supportive, as well as negative for a bunch of currencies that depend on US trade," he said. The dollar slipped 0.1 per cent to 113.65 Yen, and 0.1 per cent against a basket of currencies. The Euro was unchanged at $1.0725, little moved by a surprise fall in German business morale this month. Germany's 10-year Bund yield rose to a six-week high of 0.38 per cent and France's benchmark 10-year yield hit a one-year high of 0.95 per cent, with bond prices weighed down by the rally in stocks and new debt supply. Sterling was steady at $1.2524 after Britain's Supreme Court ruled that the government would need approval from parliament before formally triggering the country's departure from the European Union. The decision overall was seen as clearing the way for Prime Minister Theresa May to get on with launching Brexit talks. Sterling has bounced 4 per cent over the last week. Oil prices gave back much of their overnight gains. Brent futures dipped 0.5 per cent to $55.13 per barrel, after rising 0.4 per cent overnight. Renewed optimism over Trump's growth policies took the wind out of a recent rally in safe-haven gold, which fell 0.6 per cent to $1,201 per ounce. (Reuters)

Reignited 'Trump trades' help world stocks hit 19-month high

World stocks, the dollar and oil fell on Wednesday, while safe-haven assets such as gold and the Swiss franc rose as investors were rattled by signs the US presidential race was tightening just days before the vote.

Investors were beginning to rethink their long-held bets of a November 8 victory for Democratic candidate Hillary Clinton amid signs her Republican rival Donald Trump could be closing the gap, deepening the recent decline across major stock markets.

Asian stocks hit a seven-week low on Wednesday, while European bourses followed Wall Street&#39;s lead overnight and slid to a four-month low.

Bonds rose alongside gold, the Swiss franc and Japanese yen, with the yield on 10-year US Treasuries falling for the third day in a row. British gilts, which have recently been slammed by uncertainty surrounding the post-Brexit UK outlook, surged too.

&quot;The lead up to the US presidential election was always expected to be lively but the events of the last couple of days have seriously taken their toll on investor sentiment,&quot; said Craig Erlam, senior market analyst at Oanda in London.

Investor anxiety has deepened in recent sessions over a possible Trump victory given uncertainty on the Republican candidate&#39;s stance on key issues including foreign policy, trade relations and immigrants, while Clinton is viewed as a candidate of the status quo.

Europe&#39;s index of leading 300 shares was last down 0.4 per cent, having earlier hit a four-month low of 1,313 points. Britain&#39;s Britain&#39;s FTSE and Germany&#39;s DAX fell 0.4 and 0.7 per cent, respectively.

MSCI&#39;s broadest index of Asia-Pacific shares outside Japan dropped 1.1 per cent to seven-week lows while the yen&#39;s rise to a two-week high helped push Japan&#39;s Nikkei down 1.8 percent.

US stock futures recovered earlier losses, pointing to a fall of only 0.1 per cent at the open. This would still signify a fresh four-month low for Wall Street.

Pricing a Trump victory

The tumultuous presidential race appeared to tighten after news that the Federal Bureau of Investigation was reviewing more emails as part of a probe into Clinton&#39;s use of a private email server.

While Clinton held a five-percentage-point lead over Trump, according to a Reuters/Ipsos opinion poll released on Monday, some other polls showed her Republican rival ahead by 1-2 percentage points.

Barclays strategists estimate that a rise in Trump&#39;s polling odds to 50 per cent could see the S&amp;P 500 fall 4-5 percent, and potentially as much as 10-11 percent if he wins.

This has unnerved markets and the CBOE volatility index, often seen as investors&#39; fear gauge, rose to a two-month high above 20 percent.

The tension in markets came as the Federal Reserve holds its two-day policy meeting, with its statement due later on Wednesday. While traders do not expect a rate hike just a week ahead of the presidential election, they are looking for signs that the Fed will move in December.

Investors have grown increasingly confident in recent weeks that the Fed will follow through next month, attaching an 80 percent probability to such a move, according to fed funds futures pricing.

But currency traders have sold the dollar this week in part because they suspect Trump would prefer a weaker dollar given his protectionist stance on international trade, and in part because the uncertainty surrounding a Trump win might lead to a more dovish stance from the Fed in the months ahead.

The dollar fell again on Wednesday, after posting its biggest one-day fall on Tuesday in two months.

The euro rose 0.4 per cent to touch $1.11 for the first time in more than three weeks. It is up about two per cent from its 7-1/2-month low of $1.0851 hit last week.

Against the yen, the dollar fell 0.8 percent to 103.24 yen from three-month high of 105.54 yen set on Friday.

&quot;If you had a long dollar position on the view that the dollar would gain because Clinton would win, you would surely close that position because her victory is less certain,&quot; said Koichi Yoshikawa, executive director of financial markets at Standard Chartered Bank.

Other safe-haven assets also rose. The Swiss franc hit a four-month high of 1.0750 francs per euro, its highest level since late June, while gold reached a four-week high of $1,297 per ounce.

Oil prices fell for the fourth day in a row, sliding to one-month lows. Brent crude futures fell more than 1 percent to $47.53 per barrel, and US crude was down as low as $46.06. Oil has lost 10 percent in the last two weeks.

(Reuters)

Investors fear Trump's victory because of his uncertain stance on issues of foreign policy, trade relations and immigrants

World stocks, the dollar and oil fell on Wednesday, while safe-haven assets such as gold and the Swiss franc rose as investors were rattled by signs the US presidential race was tightening just days before the vote. Investors were beginning to rethink their long-held bets of a November 8 victory for Democratic candidate Hillary Clinton amid signs her Republican rival Donald Trump could be closing the gap, deepening the recent decline across major stock markets. Asian stocks hit a seven-week low on Wednesday, while European bourses followed Wall Street's lead overnight and slid to a four-month low. Bonds rose alongside gold, the Swiss franc and Japanese yen, with the yield on 10-year US Treasuries falling for the third day in a row. British gilts, which have recently been slammed by uncertainty surrounding the post-Brexit UK outlook, surged too. "The lead up to the US presidential election was always expected to be lively but the events of the last couple of days have seriously taken their toll on investor sentiment," said Craig Erlam, senior market analyst at Oanda in London. Investor anxiety has deepened in recent sessions over a possible Trump victory given uncertainty on the Republican candidate's stance on key issues including foreign policy, trade relations and immigrants, while Clinton is viewed as a candidate of the status quo. Europe's index of leading 300 shares was last down 0.4 per cent, having earlier hit a four-month low of 1,313 points. Britain's Britain's FTSE and Germany's DAX fell 0.4 and 0.7 per cent, respectively. MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1.1 per cent to seven-week lows while the yen's rise to a two-week high helped push Japan's Nikkei down 1.8 percent. US stock futures recovered earlier losses, pointing to a fall of only 0.1 per cent at the open. This would still signify a fresh four-month low for Wall Street. Pricing a Trump victory The tumultuous presidential race appeared to tighten after news that the Federal Bureau of Investigation was reviewing more emails as part of a probe into Clinton's use of a private email server. While Clinton held a five-percentage-point lead over Trump, according to a Reuters/Ipsos opinion poll released on Monday, some other polls showed her Republican rival ahead by 1-2 percentage points. Barclays strategists estimate that a rise in Trump's polling odds to 50 per cent could see the S&P 500 fall 4-5 percent, and potentially as much as 10-11 percent if he wins. This has unnerved markets and the CBOE volatility index, often seen as investors' fear gauge, rose to a two-month high above 20 percent. The tension in markets came as the Federal Reserve holds its two-day policy meeting, with its statement due later on Wednesday. While traders do not expect a rate hike just a week ahead of the presidential election, they are looking for signs that the Fed will move in December. Investors have grown increasingly confident in recent weeks that the Fed will follow through next month, attaching an 80 percent probability to such a move, according to fed funds futures pricing. But currency traders have sold the dollar this week in part because they suspect Trump would prefer a weaker dollar given his protectionist stance on international trade, and in part because the uncertainty surrounding a Trump win might lead to a more dovish stance from the Fed in the months ahead. The dollar fell again on Wednesday, after posting its biggest one-day fall on Tuesday in two months. The euro rose 0.4 per cent to touch $1.11 for the first time in more than three weeks. It is up about two per cent from its 7-1/2-month low of $1.0851 hit last week. Against the yen, the dollar fell 0.8 percent to 103.24 yen from three-month high of 105.54 yen set on Friday. "If you had a long dollar position on the view that the dollar would gain because Clinton would win, you would surely close that position because her victory is less certain," said Koichi Yoshikawa, executive director of financial markets at Standard Chartered Bank. Other safe-haven assets also rose. The Swiss franc hit a four-month high of 1.0750 francs per euro, its highest level since late June, while gold reached a four-week high of $1,297 per ounce. Oil prices fell for the fourth day in a row, sliding to one-month lows. Brent crude futures fell more than 1 percent to $47.53 per barrel, and US crude was down as low as $46.06. Oil has lost 10 percent in the last two weeks. (Reuters)

Global stocks fall over chances of Trump's victory in US elections

Asian stocks turned lower today and the Yen surged after the Bank of Japan (BOJ) refrained from taking further stimulus steps, hours after the Federal Reserve&#39;s (Fed&#39;s) own review had struck a cautious note on its policy outlook. 
 
The Dollar was already under pressure after the Fed left interest rates unchanged overnight and became slightly less hawkish. While signalling that it still expected two rate hikes this year, the Fed also said slower economic growth would crimp the pace of monetary policy tightening in future years. 
 
Spreadbetters expected Europe to follow Asia&#39;s lead and saw a lower open for Britain&#39;s Financial Times Stock Exchange (FTSE), Germany&#39;s Deutscher Aktienindex (DAX) and France&#39;s Cotation Assist?e en Continu (CAC).&nbsp; 
 
The BOJ kept monetary policy steady and stuck to its optimistic view of the economy today even as renewed yen rises and slumping stock prices threaten to derail a fragile economic recovery. 
 
While the BOJ&#39;s decision did not come as a big surprise, expectations that the central bank will take action next month increased. But for now uncertainty over whether Britain will vote to quit the European Union is strengthening the Yen because of the Japanese currency&#39;s safe-haven status. 
 
&quot;The Bank of Japan are in a pickle and more than most will be really hoping that the UK don&#39;t vote to &#39;leave,&#39; or USD/JPY will be trading below 100 Yen and they will have to do something amazingly punchy just to stabilise assets,&quot; wrote Chris Weston, chief market strategist at IG in Melbourne. 
 
&quot;On the other hand, even if the UK votes to &#39;remain&#39; and risk assets undergo some sort of relief rally, domestic inflation expectations shouldn&#39;t pick up greatly and they may need to ease in this scenario anyhow.&quot; 
Morgan Stanley Capital International&#39;s (MSCI) broadest index of Asia-Pacific shares outside Japan was last down 0.9 per cent.&nbsp; 
 
Japan&#39;s Nikkei hit a two-month intraday low and was last down 2.6 per cent. 
 
South Korea&#39;s Kospi lost 0.8 per cent and Hong Kong&#39;s Hang Seng dropped 1.9 per cent. 
 
On the whole, investors were still cautious on worries Britain may vote to leave the European Union, which saw US stocks fall for a fifth straight session overnight despite the Fed&#39;s subdued view on interest rates. 
 
While the US central bank kept policy steady as widely expected and lowered its economic projections, it did signal that it still planned to raise rates twice in 2016. 
 
However, the Fed&#39;s conviction appeared shakier with six of its 17 policymakers projecting just one increase this year. Only one Fed policymaker had done so when economic forecasts were last issued in March. 
 
&quot;Although the Fed&#39;s projection tout two rate hikes, a rate hike in July is highly unlikely, which makes it questionable whether the Fed can raise rates twice in its three policy meetings left by the end of year,&quot; said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank. 
 
The greenback was down 1.5 per cent at 104.400 Yen after hitting 104.320, its lowest since September 2014. 
 
The Yen also hit its highest level since January 2013 against the Euro and a four-year peak versus the Australian Dollar. 
 
The Euro inched up 0.1 per cent to $1.1272 after gaining 0.5 per cent overnight.&nbsp; 
 
The 10-year Treasury note yield slipped to a four-month trough of 1.545 per cent and added pressure on the Dollar. 
 
The recent bout of global risk aversion generated by Brexit fears have boosted safe-havens like government debt, sending the German and Japanese benchmark 10-year yields to record lows this week. 
 
The Brexit concerns also saw US crude oil fall 1 per cent to $47.52 a barrel, on track for a sixth straight day of losses. Brent crude was down 0.8 per cent at $48.59 a barrel. 
 
Spot gold touched $1,301.40 an ounce, highest since May 3, thanks to the Fed&#39;s seemingly more cautious approach to monetary tightening. Higher interest rates tend to diminish the appeal of non-yielding gold. 
(Reuters)

Bank of Japan's uncertainty over whether Britain would vote to quit the EU is strengthening the yen due to its safe-haven status

Asian stocks turned lower today and the Yen surged after the Bank of Japan (BOJ) refrained from taking further stimulus steps, hours after the Federal Reserve's (Fed's) own review had struck a cautious note on its policy outlook. The Dollar was already under pressure after the Fed left interest rates unchanged overnight and became slightly less hawkish. While signalling that it still expected two rate hikes this year, the Fed also said slower economic growth would crimp the pace of monetary policy tightening in future years. Spreadbetters expected Europe to follow Asia's lead and saw a lower open for Britain's Financial Times Stock Exchange (FTSE), Germany's Deutscher Aktienindex (DAX) and France's Cotation Assist?e en Continu (CAC). The BOJ kept monetary policy steady and stuck to its optimistic view of the economy today even as renewed yen rises and slumping stock prices threaten to derail a fragile economic recovery. While the BOJ's decision did not come as a big surprise, expectations that the central bank will take action next month increased. But for now uncertainty over whether Britain will vote to quit the European Union is strengthening the Yen because of the Japanese currency's safe-haven status. "The Bank of Japan are in a pickle and more than most will be really hoping that the UK don't vote to 'leave,' or USD/JPY will be trading below 100 Yen and they will have to do something amazingly punchy just to stabilise assets," wrote Chris Weston, chief market strategist at IG in Melbourne. "On the other hand, even if the UK votes to 'remain' and risk assets undergo some sort of relief rally, domestic inflation expectations shouldn't pick up greatly and they may need to ease in this scenario anyhow." Morgan Stanley Capital International's (MSCI) broadest index of Asia-Pacific shares outside Japan was last down 0.9 per cent. Japan's Nikkei hit a two-month intraday low and was last down 2.6 per cent. South Korea's Kospi lost 0.8 per cent and Hong Kong's Hang Seng dropped 1.9 per cent. On the whole, investors were still cautious on worries Britain may vote to leave the European Union, which saw US stocks fall for a fifth straight session overnight despite the Fed's subdued view on interest rates. While the US central bank kept policy steady as widely expected and lowered its economic projections, it did signal that it still planned to raise rates twice in 2016. However, the Fed's conviction appeared shakier with six of its 17 policymakers projecting just one increase this year. Only one Fed policymaker had done so when economic forecasts were last issued in March. "Although the Fed's projection tout two rate hikes, a rate hike in July is highly unlikely, which makes it questionable whether the Fed can raise rates twice in its three policy meetings left by the end of year," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank. The greenback was down 1.5 per cent at 104.400 Yen after hitting 104.320, its lowest since September 2014. The Yen also hit its highest level since January 2013 against the Euro and a four-year peak versus the Australian Dollar. The Euro inched up 0.1 per cent to $1.1272 after gaining 0.5 per cent overnight. The 10-year Treasury note yield slipped to a four-month trough of 1.545 per cent and added pressure on the Dollar. The recent bout of global risk aversion generated by Brexit fears have boosted safe-havens like government debt, sending the German and Japanese benchmark 10-year yields to record lows this week. The Brexit concerns also saw US crude oil fall 1 per cent to $47.52 a barrel, on track for a sixth straight day of losses. Brent crude was down 0.8 per cent at $48.59 a barrel. Spot gold touched $1,301.40 an ounce, highest since May 3, thanks to the Fed's seemingly more cautious approach to monetary tightening. Higher interest rates tend to diminish the appeal of non-yielding gold. (Reuters)

Yen surges after Bank of Japan refrains from offering more stimulus, Asian stocks down

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