Yen soars, markets wobble as Bank of Japan frustrates

The yen soared Friday after the Bank of Japan only tweaked its stimulus programme, disappointing traders who had expected a huge boost to lift global markets.

Although Tokyo stocks ended higher, with the financial sector cheered that the bank did not cut borrowing costs further into negative territory, most other Asian indices retreated.

European equities diverged, with Frankfurt and Paris lifted by economic growth data, while London slid as oil prices hit three-month lows.

Investors were meanwhile bracing for the outcome of the European Banking Authority's latest round of stress tests on 51 banks across Europe, amid concern over Italy's lenders. The EBA will post its results at 2000 GMT.

In Asia on Friday, Bank of Japan policymakers said only that they would boost its exposure to riskier investments, leaving its massive 80 trillion yen annual asset-buying programme unchanged.

The news came despite weeks of fervent speculation that the BoJ would pump fresh cash into the nation's sluggish economy.

"Markets may be disappointed that the Bank of Japan did not deliver more stimulus overnight ... but financials are clearly relieved that it didn't take interest rates further negative," said analyst Mike van Dulken at traders Accendo Markets.

The news sent the dollar tumbling in Asian deals to below 103 yen at one point from 104.20 yen earlier in the day, and well off the levels above 107 yen touched last week.

In late morning London deals it was at 103.58 yen, while the euro bought 115.08 yen from 116.60 yen.

The Nikkei stock index sank almost two percent at one point but bounced back to end 0.6 percent higher.

Japanese officials are under intense pressure to deliver as the fate of Prime Minister Shinzo Abe's faltering bid to reignite the world's number three economy, dubbed Abenomics, looks increasingly gloomy.

The gathering was its first since Britain's shock vote last month to quit the European Union. The referendum result hammered financial markets and sparked a yen rally that is threatening corporate Japan's bottom line -- and fanning concerns about growth.

- Eurozone growth halves -

Back in Europe, official data showed eurozone economic growth halved in the second quarter, with analysts warning that Brexit fallout could harm the economy further later in the year.

The Eurostat statistics agency said economic growth in the 19-nation single currency bloc slowed to 0.3 percent in the April to June period, with stagnation in France largely contributing to the poor data.

This was down from a far more robust expansion of 0.6 percent in the previous quarter.

"It was looking like the (eurozone) region could be in for a real worrying number following the stagnant French figure from earlier in the morning; and in no way is a halving of growth quarter-on-quarter a good thing," Spreadex analyst Connor Campbell told AFP.

"But the region is still seeing some kind of growth -- even if it is much reduced -- leading to the response from the DAX and the CAC.

"As for the FTSE another sharp slide from Brent crude is dragging down its commodity sector."

On oil markets both main contracts were headed for a seventh straight day of losses as worries about a global supply glut return to the fore.

- Key figures around 1030 GMT -

London - FTSE 100: DOWN 0.1 percent at 6,712 points

Frankfurt - DAX 30: UP 0.4 percent at 10,319

Paris - CAC 40: UP 0.1 percent at 4,424.10

EURO STOXX 50: UP 0.5 percent at 2,981.80

Tokyo - Nikkei 225: UP 0.6 percent at 16,569.77 (close)

Hong Kong - Hang Seng: DOWN 1.3 percent at 21,891.37 (close)

Shanghai - Composite: DOWN 0.5 percent at 2,979.34 (close)

New York - DOW: DOWN 0.1 percent at 18,456.35 (close)

Euro/dollar: UP at $1.1109 from $1.1076

Pound/dollar: UP at $1.3159 from $1.3166

Dollar/yen: DOWN at 103.58 yen from 105.32 yen