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Hong Kong - European stocks rallied with US equity index futures and the pound before a forecast cut in UK interest rates.
Japanese shares climbed and the yen slumped on speculation Prime Minister Shinzo Abe is contemplating so-called helicopter money to revive the world’s third-largest economy.
The Topix index capped its biggest four-day advance since February in Tokyo and the yen weakened against all 31 major peers. South Korea’s won rose after a monetary policy review, while New Zealand’s dollar dropped. Crude oil rebounded from a two-month low and gold fell. Sovereign bonds retreated.
Former Federal Reserve chief Bernanke met Japanese leaders in Tokyo this week after earlier in the year floating the idea of helicopter money, which involves the central bank directly funding government spending, with one of Abe’s key advisers.
Shares in the US are at an all-time high and investors will be looking to see whether better-than-expected economic data have helped arrest a slide in the earnings of America’s biggest companies.
“Investors remain very skittish and it won’t take much to rattle sentiment,” said James Audiss, a senior investment adviser at Shaw and Partners in Sydney, which manages about $7.4bn. “We’re watching the yen-dollar rate really closely.”
South Korea’s central bank left interest rates unchanged at a record low, as forecast by all 20 economists in a Bloomberg survey, and lowered its projections for economic growth and inflation. Singapore’s expansion quickened to an annualized 0.8% in the second quarter, from 0.2% in the prior three months, data showed. JPMorgan and BlackRock are among US firms due to announce results.
Stocks
The Stoxx Europe 600 Index climbed 0.9% as of 09:20, after gaining in all but one of the last five sessions. The MSCI Asia Pacific Index rose 0.1%, after advancing 3.6% over the last three sessions. Japan’s Topix closed at a one-month high.
Etsuro Honda, an adviser to Abe, said Bernanke met him in April and warned there was a risk Japan at any time could return to deflation. Bernanke noted that helicopter money - in which the government issues non-marketable perpetual bonds with no maturity date and the Bank of Japan directly buys them - could work as the strongest tool to overcome deflation, according to Honda.
Singapore’s benchmark was down 0.1% before trading in Southeast Asia’s largest stock market was halted at 08:38 owing to a technical fault. The bourse missed a self-imposed target of 09:00 for trading to resume.
The Shanghai Composite Index retreated 0.2% from a three-month high as a technical gauge indicated Chinese shares were overbought for the first time since the height of a stock-market bubble in June 2015. The index has risen 15% since reaching this year’s low in January and its relative strength index exceeded 70 at Wednesday’s close, signaling to some investors a reversal was likely.
“As it edges up, the market is running into greater and greater resistance,” said Shen Zhengyang, a strategist at Northeast Securities Co. in Shanghai.
“China is unlikely to further boost money supply even if global central banks start a new round of easing, while the Chinese economy is not improving in the near term.”
Nintendo jumped 16% to a five-year high, boosted by the success of its Pokemon Go mobile game. China Steel surged in Taipei by the most since October before the company announces its product prices for September.
Hyundai fell as much as 3.3% in Seoul after workers in South Korea voted to strike over wages and working conditions. Taiwan Semiconductor Manufacturing was up 0.3% before the company posted better-than-expected earnings.
Futures on the S&P 500 Index added 0.6%. A Citigroup gauge that tracks the degree to which US economic data are exceeding economists’ projections has climbed to the highest level since January 2015. Analysts predict second-quarter profits will drop 5.7% at S&P 500 firms, which would make it the fifth straight quarterly decline, the longest streak since 2009.
Currencies
The Japanese yen weakened 1% versus the dollar, after earlier strengthening as much as 0.5%. Bernanke said on Tuesday that Japan should carry on with Abenomics policies by supplementing monetary policy with fiscal stimulus, according to Koichi Hamada, a key economic adviser to Abe who was present at the talks. Helicopter money wasn’t mentioned that day, he said.
The pound was 0.5% stronger, after earlier weakening as much as 0.3%. Thirty of 54 economists surveyed by Bloomberg predict the Bank of England will lower its benchmark interest rate on Thursday, with a majority of those seeing a 25 basis-point reduction to 0.25%.
South Korea’s won rose as much as 0.8% to a two-month high. The Bank of Korea lowered its economic growth forecast for this year to 2.7%, from an April projection of 2.8%, and trimmed its inflation estimate to 1.1% from 1.2%.
The revisions were more modest than anticipated and suggest there’s no urgent need for borrowing costs to be cut, said Hong Sup Shin, head of fixed-income at Truston Asset Management in Seoul.
The kiwi fell 0.7% after the Reserve Bank of New Zealand said it will issue an unscheduled assessment of the economy next week, prompting traders to increase bets on an interest-rate cut in August. The odds of a quarter-point reduction at the next policy review on August 11 rose to more than 60% from 40%, derivatives show.
Commodities
West Texas Intermediate crude oil was up 1.5% at $45.40 a barrel, after tumbling 4.4% on Wednesday as US data showed an unexpected increase in gasoline inventories.
“Every time we have seen these big pullbacks, there is quite a lot of strong buying around that $44, $45 level,” said Angus Nicholson, a markets analyst in Melbourne at IG. “There are definitely active participants in the market who are very happy to be picking up oil at that price.”
Gold declined 0.8% to $1 332 an ounce, after advancing 0.7% in the last session. It was trading at about $1 260 before Britain’s June 23 vote to leave the European Union.
Corn advanced 1.3% in Chicago, climbing for a third day as forecasts for hot and dry weather in the US Midwest raise concern crop yields will deteriorate.
Bonds
Sovereign debt fell in the US, the UK, Japan and Germany. The yield on US Treasuries due in a decade rose three basis points to 1.51%, while that on Japanese debt increased by two basis points to minus 0.26%. Yields climbed four basis points in the UK and Germany to 0.78% and minus 0.05%, respectively.
