STOXX 600 up 0.1%
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BoJ keeps ultra low rate, bond yield cap
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UK inflation falls slightly to 10.5%
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NEWS ELSEWHERE (0948 GMT)
European shares had a muted start to the day, with the STOXX 600 benchmark up just 0.1% after the first hour-and-half of trading albeit having squeezed its way to a new nine-month high early on.
Tech stocks and basic resources were among the stronger sectoral performers, up 1.2% and 1% respectively.
The big news of the day was on the macro front, most notably the Bank of Japan maintained ultra-low interest rates, including a bond yield cap it was struggling to defend. That helped boost risk sentiment slightly across global asset classes, but the ripples were fairly small by the time they had reached European stocks.
Closer to home, British inflation eased following the trend in the eurozone and the U.S. but remained at a hot 10.5%.
The FTSE 100 was in line with broader moves up 0.16%.
CAUTIOUS START (0750 GMT)
Futures are pointed to a cautious open for European shares on Wednesday though Britain's FTSE 100, hovering just shy of its all time high, is set to underperform equity benchmarks elsewhere in the region.
Eurostoxx 50 futures are flat with Dax futures also little changed while FTSE 100 futures are down 0.11%.
There is also plenty of European company news for traders to read this morning, in fact a reasonable amount from BASF alone.
The German chemicals giant unveiled a 7.3 billion euro ($7.9 billion) non-cash impairment on Wintershall Dea WINT.UL, after the oil and gas exploration joint venture decided to exit Russia following its invasion of Ukraine, and separately, Indonesian officials said BASF and French miner Eramet are finalising a $2.6 billion partnership deal to invest in a facility in Indonesia to process nickel for use in batteries for electric vehicles.
Elswhere, Richemont reported higher quarterly sales on Wednesday as tourists returned to Europe and Japan, but the luxury group missed market estimates after sales in China plunged by almost a quarter.
And British retailers continued to hold up fairly well. British retailer WH Smith said on Wednesday that revenue had risen over the last 20 weeks due to a rebound in travel from COVID-19 lows, and while electricals retailer Currys reported a further deterioration in its international business, it kept its financial guidance for the full year.
MORNING BID - BOJ GOES FOR BROKE (0715 GMT)
So after all the frenetic speculation and massive market pressure, the Bank of Japan (BOJ) has held the line on its super-easy stimulus policy.
The economic outlook was revised a little, with GDP forecasts nudged down and CPI inflation up a touch to 1.8%, but that was short of the 2% target that some had predicted.
This saw the yen down across the board and the dollar up 2.6% to 131.42 yen. Global bond markets breathed a sigh of relief and U.S. 10-year yields eased 8 basis points to 3.48%.
The BOJ will continue to buy bonds in whatever amount necessary to maintain its target for 10-year JGB yields at zero. The trading band remains at -0.5% to +0.5%, notwithstanding the fact yields have now nudged above the ceiling for four sessions in a row.
One subtle change was to rules for providing fixed-rate funds to markets, with the BOJ saying the rate charged on loans out to 10 years would be set "to encourage the formation of a yield curve that is consistent with the guideline for market operations." It then offered to lend one trillion yen ($7.62 billion) at a fixed rate for five years.
It was unclear how meaningful this change would be, but the BOJ's defiant stance did see 10-year JGB yields backtrack to 0.36% from an early high of 0.51%.
Analysts still suspect the BOJ will again have to buy a record amount of JGBs this month to maintain the ceiling. The bank already holds more than half of all JGBs, and 80% or 90% of some bond lines, a major reason the yield curve looks out of whack and dealers complain endlessly of a dearth of liquidity.
In a sense, the BOJ is the single source of liquidity as it really is the buyer of last resort right now. Perhaps the idea is to provide an escape route for investors to exit their long JGB positions at current prices, and avoid the deeper losses that would surely come when YCC is finally wound down.
That could be an awful lot of buying given the next policy meeting isn't until March 10, but at least global yields seem to be trending downwards which could help ease the pressure.
An added twist for the March meeting is that the government is reportedly set to announce a new BOJ governor in February, ahead of Kuroda's retirement in April, and some analysts assume it will be left to the new guy to reverse course.
Or, just maybe, the BOJ will go on buying until it owns all of the government's debt, and them simply forgive it. It's just an accounting entry after all.