Stocks rose in Europe and Asia on Wednesday, while the yen sank against the dollar, after Prime Minister Shinzo Abe said his government would present a $265-billion stimulus package to reflate the Japanese economy.

The larger-than-expected figure helped lift Tokyo stocks 1.7 per cent and Asian shares to one-year highs as investors looked ahead to a Bank of Japan meeting on Friday, with expectations running high it will take steps to ease monetary policy.

European shares were led higher by the auto and luxury sectors, while Deutsche Bank dropped 4.6 per cent after it unveiled sharply lower second-quarter revenues as low interest rates and volatile markets weighed on the business.

The pan-European STOXX 600 index rose 0.5 per cent and the FTSEurofirst 300 0.4 per cent. Britain's FTSE 100 index gained 0.3 per cent. Germany's DAX index rose 0.8 per cent and has recouped all losses incurred since Britain's June 23 vote to leave the European Union.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1 per cent, having previously climbed to its highest level since August 11, 2015. It has risen 10 per cent so far this month.

Chinese stocks , however, had their worst day in six weeks on worries about new regulatory restrictions.

More dollar downside?

In currency markets, the dollar rose nearly 1 per cent to 105.70 yen, having risen as far as 106.54 at one point, after reports of the Japanese stimulus package.

“So far it looks like the Bank of Japan is not ready to do something new and that leaves the potential for more downside for the dollar before the meeting on Friday,” said Thu Lan Nguyen, a currency strategist with Commerzbank in Frankfurt.

Fed policy statement

Gains against the yen pushed the dollar up 0.1 percent against a basket of currencies before a policy announcement from the Federal Reserve later in the day.

The US central bank is not expected to change policy this month but investors will scour its statement, due at 1800 GMT, for any hints on the timing of future rate hikes.

Stronger US economic data of late has revived expectations of a Fed hike and markets see roughly an even chance of a rate rise in December.

Two-year US Treasury yields, seen most sensitive to higher rates, held close to four-week highs. By contrast Japanese two- and five-year government bond yields hit record lows of minus 0.37 and minus 0.38 per cent, respectively.

German 10-year Bund yields, the benchmark for euro zone borrowing costs, fell 1.2 basis points to just above minus 0.10 per cent.

Crude oil

Oil prices fell, staying close to near three-month lows hit earlier this week on concerns about a glut of some products and slowing economic growth.

Brent crude traded down 10 cents a barrel at $44.77. It has fallen some 15 percent since hitting an eight-month high in early June.

Gold held steady at $1,319 an ounce

Related Topics
comment COMMENT NOW