European shares rose and bond yields fell on Tuesday while the yen hit its lowest since 2007 on hopes that a snap election and delayed tax increase in Japan might lead to more economic stimulus measures there.
Investors were also cheered by a better-than-expected reading of German investor and analyst sentiment, which pointed to a more positive outlook for Europe’s No. 1 economy.
Japanese Prime Minister Shinzo Abe’s call for parliament to be dissolved on Friday was widely expected and is seen potentially bringing more measures to stimulate growth after the Japanese economy unexpectedly slipped into recession. Abe also said an unpopular sales tax rise would be delayed.
The yen fell to a seven-year low against the dollar after Abe’s comments, extending recent losses in the wake of fresh stimulus measures announced by Japan’s central bank at the end of October. It slid to a six-year trough against the euro.
“This is positive for growth and supports the ‘overweight’ position in Japanese equities we added to on weakness yesterday,” said Trevor Greetham, Director of Asset Allocation at Fidelity Worldwide Investment.
The pan-European FTSEurofirst 300 .FTEU3 extended early gains and was up 0.6 percent at 1,360.08 points at 1224 GMT. Japan’s Nikkei index had risen 2.2 percent after press reports said Abe would call snap elections and delay the tax increase.
U.S. equity futures SPc1 pointed to a flat opening on Wall St.