Japan shares test 15-year highs before BOJ meeting

SYDNEY - Japanese shares were probing 15-year peaks Wednesday as investors favoured Asian assets on expectations of more stimulus from countries such as China and Japan, as well as a delayed start to any tightening by the U.S. Federal Reserve.

The chase for yield in emerging markets overshadowed a flat finish for Wall Street, where a swing higher in the dollar was viewed as a threat to multinational corporations' profits. Oil prices also suffered a setback on data showing a jump in crude stockpiles.

The Nikkei sprang 0.6 per cent higher in early trade to 19,763, so challenging the recent triple cart top around 19,778. A break there would take it to ground last trod in April 2000 and would be very bullish technically.

Indeed, milestones littered the region with Chinese shares at seven-year peaks and MSCI's broadest index of Asia-Pacific shares outside Japan at its highest since September. South Korea's main index had also made a seven-month top, while the Philippines market has been on a tear over the last couple of weeks to reach record highs.

The Bank of Japan marks an anniversary of its own as it meets two years to the month since it launched a massive debt-buying campaign that has built its balance sheet by a cool 156 trillion yen ($1.3 trillion). While most expect nothing new this week there is mounting speculation the central bank could ease yet further at its April 30 meeting should inflation and consumer spending continue to disappoint.

The prospect of more years of super-easy policy in Japan proved a drag on the yen, with the dollar rising to 120.30 and well away from the post-payrolls low of 118.69. The dollar also recovered all the ground it lost against the euro from Friday's jobs report, to stand at $1.0820. Against a basket currencies, the dollar was up at 97.898.

The speedy turnaround for the dollar did not go down so well on Wall Street. Citing the currency's strength, Bank of America-Merrill Lynch cut its 2015 earnings estimates for the S&P 500 by $2 a share. The Dow fell 0.03 pe rcent, while the S&P 500 lost 0.21 percent and the Nasdaq 0.14 per cent.

Minutes of the Federal Reserve's March meeting will be released on Wednesday, potentially giving investors more clarity on the timeline for U.S. rate increases. The U.S. central bank removed a reference to being patient on increasing borrowing costs from its post-meeting statement last month, and revised estimates for the Fed funds rate so as to indicate a slower pace of tightening. Chair Janet Yellen said at the time that the removal of the term patience didn't mean the Fed would be impatient.

Alcoa Inc. unofficially kicks off the American earnings season, and the euro area reports on retail sales. Oil supplies data is due, with analysts predicting U.S. stockpiles expanded from a record high.

Reuters, Bloomberg

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