The Bank of Japan's policy tweak sent the yen soaring but it steadied on Wednesday

London (AFP) - European and US stocks traded firmly higher Wednesday, lifted by US company earnings reports and cheerier consumer confidence data.

The yen steadied after its biggest daily gain versus the dollar in 24 years following a shock Bank of Japan tweak to monetary policy.

In Europe, Paris led the way, closing two percent up, followed by London at 1.7 percent and Frankfurt at 1.5 percent.

Equity markets often experience a so-called Santa rally, when prices rise during thin year-end trading dominated by small investors in a festive mood.

Wall Street stocks also churned higher in mid-morning trades, buoyed by rises for both Nike and FedEx after earnings reports.

“The stock market was primed to jump on any whiff of news that was better than feared, better than expected, or simply good,” said Patrick J. O’Hare, of Briefing.com.

“That’s what it is doing this morning, enthused by the possibility that Nike and FedEx might be snow plows clearing the path for a year-end/Santa Claus rally effort.”

Consumer confidence in the US economy jumped in December, as inflation expectations dipped and gas prices cooled, survey data showed.

In Europe’s biggest economy, German consumers are also heading into 2023 feeling slightly less gloomy than in recent months, a key survey found, as government interventions take some of the sting out of soaring energy costs.

- ‘Policy shift’-

Investors were also still digesting a BoJ move Tuesday to allow yields on certain government bonds to move in a wider band.

It was seen as a precursor to a possible interest rate hike next year, finally bringing the central bank in line with others around the world.

National Australia Bank’s Ray Attrill said the “tweak has… been interpreted as putting the writing on the wall for a policy shift next year”.

The announcement resulted in Japan’s currency soaring to a four-month high against the dollar, with the US unit worth 130.58 yen.

A gain of 3.9 percent for the yen Tuesday was the biggest daily jump since 1998.

One dollar was worth 132.22 yen on Wednesday.

The yen’s gain continued to weigh on share prices of Japanese exporters Wednesday.

- ‘Welcome relative calm’ -

The BoJ move followed hikes to US and European interest rates last week and warnings by officials that tightening would likely go higher than initially expected.

A series of aggressive rate hikes this year is aimed at bringing decades-high inflation under control but higher borrowing costs have fanned speculation of a world recession.

“The relative calm in equity markets is a welcome relief for investors who have been shellshocked too many times to count in one of the worst years for stocks and bonds in more than a decade,” said Stephen Innes of SPI Asset Management.

Traders were also keeping an eye on China as it quickly reopens after almost three years of a zero-Covid policy of lockdowns and mass testing that hammered the world’s number two economy.

However, there is a worry about the immediate impact of a spike in infections, with hospitals struggling, pharmacy shelves being stripped bare and crematoriums overwhelmed.

“Though unspoken, it is well understood that policymakers have decided to accept a sizeable Covid wave,” said analyst Innes.

- Key figures around 1645 GMT -

London - FTSE 100: UP 1.7 percent at 7,497.32 points (close)

Frankfurt - DAX: UP 1.5 percent at 14,097.82 (close)

Paris - CAC 40: UP 2.0 percent at 6,580.24 (close)

EURO STOXX 50: UP 1.8 percent at 3,872.15

New York - UP 1.6 percent at 33,364.67

Tokyo - Nikkei 225: DOWN 0.7 percent at 26,387.72 (close)

Hong Kong - Hang Seng Index: UP 0.3 percent at 19,160.49 (close)

Shanghai - Composite: DOWN 0.2 percent at 3,068.41 (close)

Dollar/yen: UP at 132.22 yen from 131.69 yen on Tuesday

Euro/dollar: DOWN 1.0614 at $ from $1.0632

Pound/dollar: DOWN at $1.2095 from $1.2186

Euro/pound: UP at 87.75 pence from 87.21 pence

Brent North Sea crude: UP 2.2 percent at $81.71 per barrel

West Texas Intermediate: UP 2.2 percent at $77.93 per barrel