Asia stocks boast biggest rise in 15 months, BOJ quietly confident

SYDNEY - Asian shares enjoyed their best day in 15 months on Friday, after Wall Street boasted its biggest two-day advance since late 2011 amid relief the Federal Reserve was in no rush to withdraw stimulus from the US economy.

The gains came even as oil stayed under pressure, suggesting equity investors were beginning to see the positives in lower fuel costs and increased consumer spending power.

Japan's Nikkei climbed 2.1 per cent to erase most of it's recent losses, while Australia's main index romped ahead by 2.2 per cent.

MSCI's broadest index of Asia-Pacific shares outside Japan put on 1.5 per cent, the steepest daily rise since September last year. Shares in Shanghai hit their highest in four years before running into profit taking.

"Risk sentiment is ending the week on a stronger footing after a poor start," said analysts at Barclays. "Market expectations for ECB QE add to the Fed's upbeat message on US growth and stabilization in Russia."

The Bank of Japan ended its last policy meeting of the year by recommitting to a massive stimulus campaign, printing yen to buy truck loads of government bonds. It also offered a brighter view of the economy in a sign of confidence Japan can weather the global market turbulence and the financial crisis in Russia.

BOJ Governor Haruhiko Kuroda will likely repeat calls for firms to increase wages at his post-meeting news conference, as well as urge Prime Minister Shinzo Abe to press ahead with fiscal and structural reforms.

On Wall Street, investors were still celebrating the Fed's pledge to be patient in raising rates. The Dow surged 2.43 per cent, while the S&P 500 gained 2.4 per cent and the Nasdaq 2.24 per cent.

That was the biggest daily rise for the S&P since January 2013 and left it up 4.5 per cent in just two sessions.

The technology sector jumped 3 per cent as Oracle Corp romped 10.2 per cent higher a day after quarterly results topped Wall Street expectations.

GOING NEGATIVE

In currencies, the main mover was the Swiss franc which slid after Switzerland's central bank surprised by imposing negative interest rates on deposits, essentially charging banks for parking their francs at the SNB.

A higher franc would aggravate the country's deflation problem, so the SNB hopes to stem a flight to the safe-haven currency driven by concern over the euro zone and Russia's deepening crisis.

The franc duly slid to its lowest against the US dollar since May 2013 at 0.9847 francs. However, losses against the euro were much more modest in part because the European Central Bank is widely expected to ease again soon.

Indeed, analysts were quick to note that the SNB's negative rates take effect on Jan 22, the date of the ECB's next meeting, which only fuelled speculation the ECB will finally launch all-out quantitative stimulus by buying government debt.

That was one reason the euro resumed its decline against the US dollar, dropping to $1.2276 and a long way from the week's peak of $1.2569. That was uncomfortably close to its December trough of $1.2245, and a break there would take it to territory not visited since late 2012.

The dollar also regained ground on the yen to 119.24.

With the ECB set to ease and the Fed contemplating tightening, yields have moved decisively in favour of the dollar. The premium that two-year Treasuries pay over bunds has fattened to 71 basis points, the largest since early 2007.

Yields on US 10-year paper rose back to 2.22 per cent, having been as low as 2.00 per cent early in the week.

In commodities, oil prices managed to steady for the moment after a wild week. Brent inched up 11 cents to $59.38 having lost over a $1.00 on Thursday, while US crude added 21 cents to $54.32.