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Global recovery outlook lifts Asian shares

Jan 30 2013 07:55

Tokyo - Asian shares rose to their highest level in nearly 18 months on Wednesday as strong US data further boosted investor confidence in global economic outlook, ahead of the US Federal Reserve's monetary policy decision due later in the session.

Optimism over economic recovery on strong US housing market and China's economic growth forecast for 2013 raised expectations for stronger demand for fuel and industrial commodities, underpinning oil prices and lifting copper.

The MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6%, building on the previous day's 1% rally which snapped a four-day losing streak. Gains were led by a 1% rise in the energy sector .

London copper added 0.6% to $8 153.25 a tonne while US crude oil held steady around $97.58 a barrel after rising more than 1% on Tuesday on expectations of higher demand. Brent also was steady around $114.35.

"Sentiment has changed this year, with signs of stablisation in the eurozone, a US economic recovery and a shift to a new Chinese political regime removing obstacles which had stood in the way of investors taking risks last year," said Xiao Minjie, an independent economist based in Tokyo.

"Domestic demand holds key this year. Beijing's drive to urbanise inner China will boost infrastructure spending while Southeast Asia will also likely see expansion in domestic demand accelerating," he said.

Global stock markets rose on Tuesday as earnings from US companies have generally beaten forecasts so far, with the latest upbeat results from Amazon boosting the company's stock 10%, while European equities scaled fresh two-year highs.

Commodity-reliant Australian shares inched up 0.2% after hitting a fresh 21-month high as top miners climbed on firmer copper prices.

"Shares are probably the most attractive asset," said Shane Oliver, head of investment strategy at AMP Capital. "Despite the rebound over the last year, Australian shares are offering relatively attractive starting-point dividend yields."

Hong Kong shares jumped 1% and Shanghai shares rose 0.3%.

Japan's Nikkei stock average advanced 1.1%.

Fed statement eyed

The Fed ends a two-day policy meeting on Wednesday, and few market watchers expect any near-term shift in its current, very accommodative stance.

But investors will focus on the statement for any clues to the Fed's thinking on if and when it might pull back from its aggressive easing stimulus. The minutes from the December meeting, released earlier this month, hinted at uneasiness within the Fed around its asset-buying program and sparked a sell-off in Treasuries and lifted yields up out of ranges.

"We see a prospect for sustained asset-price reflation in coming months, the result of G3 stimulus efforts and structural reallocation flows," said Morgan Stanley said in a research note.

"This has three implications: Reflation would lend support to higher-yielding emerging markets assets, safe-haven assets would continue to weaken, and expectations about emerging markets policy would likely shift."

The yen remained under pressure with the Bank of Japan set to pursue strong monetary easing as the Abe administration pushes for radical reflationary policies to end stubborn deflation.

The dollar rose 0.3% to ¥90.98, near Monday's ¥91.32, its highest level since June 2010. The euro also gained 0.3% to ¥122.78, not far from ¥122.91 also touched on Monday, its highest point since April.

The prospect of continued weakness in the yen and rising risk appetite lifted the Australian to four-year highs on the yen on Wednesday, while New Zealand dollars hovered near its highest against the yen in four years.

Aussie rose as high as ¥95.29 while Kiwi rose as high ¥76.26, close to ¥76.37 set Friday, its strongest since 2008.

The euro traded at $1.3493, after scaling a 14-month high of $1.3498 on Tuesday.

Spot gold was nearly flat at $1 664.11 an ounce, above the key 200-day moving average at $1 662.92.

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global economy  |  markets


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