Data provided by iNet BFA
Loading...
See More

Stocks firm, dollar languishes

Sep 17 2012 07:57 Reuters

Related Articles

Fed euphoria prompts risk rally

Asian shares inch lower

Asian shares fall, eyes on German ruling

Asian shares inch up

JSE stays weaker as miners weigh

Asian shares rise before German ruling

 

Singapore - Asian stocks touched their highest in more than four months on Monday and gold, oil and copper hovered near multi-month highs, after rallying late last week on hopes that fresh stimulus from the world's top central banks will support flagging growth.

The dollar languished near its lowest in seven months, as the aggressive new securities-buying programme announced by the Federal Reserve on Thursday tempted investors back into riskier assets such as equities and commodities.

MSCI's broadest index of Asia Pacific shares outside Japan crept up 0.3%, having reached its highest level since early May earlier in the session. Tokyo markets were closed for a holiday.

But European shares were seen opening lower as the initial euphoria prompted by the Fed's move fades and some investors opt to lock in profits. Bookmakers called the major indexes in London, Paris and Frankfurt to fall around 0.5%.

"The stimulus from the Fed is aiming deliberately at building confidence (in the economy) rather than pushing asset prices higher," said CMC Markets chief strategist Michael McCarthy in Sydney. "The technical picture means we are on a knife edge and the short-term risk is more to the downside."

Most of the regional gains came in the growth-sensitive materials and energy sectors.

"The materials sector has broken out of a downtrend," said IG Markets analyst Stan Shamu in Melbourne.

Indian shares were among the leading gainers in Asia, rising 0.8% to a 14-month high after the government unveiled a raft of major economic reforms late on Friday, including opening the supermarket sector to foreign retailers.

Liquidity boost

The tone has been bullish in financial markets since the European Central Bank said on September 6 it would intervene in the bond markets to drive down the borrowing costs of struggling eurozone members.

The MSCI Asia ex-Japan has climbed more than 7.5% since September 5.

A second monetary shot-in-the-arm was delivered by the Fed, which said it would pump $40bn into the economy each month until the jobs market shows sustained improvement, powering US stocks to their highest close in nearly five years on Friday.

S&P 500 futures traded in Asia edged down 0.2%, suggesting a slight pullback when trading resumes on Wall Street.

So-called quantitative easing, in which the Fed creates money to buy assets, tends to support stocks and commodities due to the increased liquidity flowing into markets, but the flood of dollars can weigh on the US currency.

The dollar index, which measures the greenback against a basket of major currencies, eased 0.1% on Monday, having fallen on Friday to levels not seen since late February.

The euro fetched around $1.3137, up 0.1% on the day but below a four-month peak of $1.3169 set on Friday. It has soared nearly 10% from a 25-month trough around $1.2042 plumbed in July.

"The euro looks firm, there is no question about that," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore. "I think it would be good to sell the euro at some point, but maybe not today," he said, adding that the euro looked firm on technical charts in the wake of its rise above the $1.30 level.

Commodities rally

Oil prices were also firm, with Brent crude rising for the eighth straight session to just shy of $117 a barrel, while US crude edged above $99 a barrel.

While central bank stimulus has so far been positive for oil, Brent crude's rally of about a third since late June could backfire by undermining demand in a fragile economy.

"The current price certainly doesn't do any favours for a global economy that is struggling to get back on track. A price rally like we are seeing now is only going to do more damage," said Victor Shum, managing director of consultancy IHS Purvin & Gertz.

"Fundamentals at the moment are not indicative of these prices, and I don't see oil being able to sustain this rally."

Copper prices fell 0.5% to around $8 335 a tonne. Analysts have been cautious on prospects for prolonged growth in industrial metals prices given slowing activity in top consumer China, and because the stimulus measures will take time to feed through to the real economy.

Oil and copper reached four-and-a-half month highs late last week.

Gold, traditionally seen as a store of value by investors worried that central bank money-printing will ultimately stoke inflation, firmed around 0.3% to about $1 775 an ounce near its highest level in seven months.

"Gold is still pretty bullish this week. I think gold prices will remain firm and probably test the high set in February," Lynette Tan, an analyst at Phillip Futures in Singapore.


* Follow Fin24 on TwitterFacebookGoogle+ and Pinterest.

 

copper  |  dollar  |  markets  |  oil  |  euro  |  us economy
NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Add your comment
Comment 0 characters remaining
 

Company Snapshot

We're talking about:

Small Business

A cash flow crunch often occurs in small businesses trying to balance cash coming in with cash going out. Watch this video to help you improve.
 
 

Savings survey not realistic

Fin24 readers respond to an in-house survey, which found that 60% of readers were confident that they would be financially comfortable in their retirement.

 
 

Start saving...

Time the key for retirement saving
Dummy's guide to saving
Save money with affordable account
All about endowments

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...
Loading...