European stocks rise on rate cut bets, yen falls after BoJ

London, Dec 19 (Reuters): European stocks rose in early trade on Tuesday and global shares were near their highest since April 2022 as traders bet on rate cuts next year, while the yen fell after the Bank of Japan stuck to its ultra-easy monetary policy. In a widely expected move, the Bank of Japan kept its ultra-low interest rates unchanged.
It also made no change to its dovish policy guidance, dashing hopes among some traders it would tweak the language to signal a near-term end to negative interest rates.
The yen tumbled, with dollar-yen up 1.2 per cent at 144.5 at 0924 GMT and euro-yen up 1.3 per cent at 158.17 . The Nikkei rose in relief, led by technology shares, and Japanese government bonds yields fell.
The supportive sentiment helped boost global markets more broadly, with the MSCI World Equity index up 0.1 per cent on the day. Europe's STOXX 600 was up 0.2 per cent and London's FTSE 100 was up 0.1 per cent.
The Bank of Japan's "dovish stance... is something that is supportive of sentiment and we've been seeing that playing out in equities which are just moving modestly higher," said Fiona Cincotta, senior markets analyst at City Index.
Cincotta said that lower liquidity may also be a factor in market moves, as traders take leave ahead of the Christmas holiday.
Meanwhile, traders were weighing up various hints about the trajectory for rates in the US and euro zone.
European Central Bank member Francois Villeroy de Galhau said that interest rates should be lowered some time in 2024 and that inflation should be back down to the ECB's 2 per cent target by 2025 at the latest.
"This is not just a forecast, this is a commitment," he said.
At the central bank's meeting last week, ECB President Christina Lagarde pushed back against market bets on imminent rate cuts, but markets were not convinced.