US open: Stocks gain as investors cheer BoJ policy announcement

US stocks gained on Friday after the Bank of Japan’s surprise decision to introduce negative interests for the first time.

At 1431 GMT, the Dow Jones Industrial Average increased 0.48%, the Nasdaq rose 1.00% and the S&P 500 climbed 0.35%.

The Bank of Japan decided to introduce a negative interest rate of -0.1% for new commercial banks' current account deposits. It means the banks will be charged by the BoJ for some deposits and hopefully encourage them to use reserves to lend to businesses.

The central bank said the rate could be extended further into negative territory in future.

“We stress that there is indeed an overarching risk the BoJ will be forced to cut deeper into the negative to avert the deflation threat stemming not least from oil and is set to stay lower for longer,” according to Danske Bank.

Stimulus measures, low interest rates and the government of Shinzo Abe’s 'Abenomics' recovery strategy have so far failed to push inflation towards the BoJ’s 2% target.

In the US, investors seemed to shrug off data showing a worse-than-expected slowdown in gross domestic product in the fourth quarter. US growth eased to an annualised rate of 0.7% from 2% in the third quarter, preliminary data from the Commerce Department revealed.

Dennis de Jong, managing director at UFX.com, said: “The outlook was pretty bright for the Federal Reserve when it raised interest rates for the first time in nearly a decade in December. It’s most definitely gloomier now.

“GDP often goes through peaks and troughs, so it would be alarmist to suggest today’s data is the start of something more serious. That said, it pushes another rate hike in March into the very unlikely bracket.”

Meanwhile, oil prices were sitting higher on hopes OPEC and Russia might reach a deal on cutting production to address the supply glut.

West Texas Intermediate rose 1.7% to $34.48 per barrel and Brent crude gained 1.7% to $33.82 per barrel at 1435 GMT.

On the macroeconomic front, the Chicago Purchasing Managers’ index rose to 55.6 in January from 42.9 the previous month.

The data, released by the Institute for Supply Management, comfortably beat economists’ expectations for a reading of 45.3 and marked the highest pace of growth in a year.

In company news, Amazon’s shares declined after the online marketplace reported its largest quarterly profit ever, but still fell short of analysts' expectations.

Microsoft jumped after it reported second quarter revenue of $23.8bn, above estimates.

Visa shares edged higher after the credit card company reported first quarter earnings of $1.7bn late on Thursday.

Rival MasterCard slumped despite reporting an 11.1% increase in quarterly profit as purchase volumes rose.

The dollar was up against all the major currencies, rising 0.70% against the pound, 0.84% against the euro and 2.12% against the yen.