Publications
Partners
Hong Kong - Global stocks advanced for a fourth day and commodities rose, buoyed by the prospect of stimulus in major economies. The pound strengthened as the UK moved closer to getting a new leader.
Japan’s Topix index of shares capped its biggest two-day jump since February and the yen extended its biggest loss since October 2014 after an election victory for Prime Minister Shinzo Abe’s coalition emboldened him to step up economic support.
S&P 500 Index futures rose after the benchmark ended the last session at a record. Sterling rose for a third day as British Home Secretary Theresa May prepared to take over as prime minister. US crude rebounded from a two-month low and nickel gained with iron ore. Sovereign bonds fell.
Global equities are almost back to where they were when the UK voted to leave the European Union. Abe said he would order ministers on Tuesday to begin compiling a stimulus package that one of his advisers has recommended should be ¥20trn in the current fiscal year.
The Bank of England is forecast to cut interest rates on Thursday and traders are betting there will be further monetary easing in the eurozone this year.
”It looks like the UK political process is moving much more swiftly than had been anticipated and that’s helped," said Mitul Kotecha, head of Asia currency and rates strategy at Barclays Plc in Singapore. “On top of that in Japan, Abe getting a super majority is fueling expectations of economic stimulus.”
Abe said Tuesday, ahead of a meeting with former Federal Reserve chairman Ben Bernanke in Tokyo, that he wants to accelerate Japan’s exit from deflation. Finance ministers from EU member countries will meet for talks in Brussels and an international Court is due to deliver its ruling on a challenge brought by the Philippines to China’s claim to more than 80% of the South China Sea.
Stocks
The Stoxx Europe 600 Index rose 0.5% as of 09:23, after surging 4.4% over the last three trading days.
The MSCI Asia Pacific Index gained 0.9%, after rallying 1.9% on Monday. The Topix climbed 2.4%, almost wiping out the losses recorded since Britain’s so-called Brexit vote was held on June 23.
Automakers led gains among Japanese exporters, with Toyota rising 2.7% and Mazda surging 6.5%. Nintendo jumped for a fourth day, taking its advance since July 6 to more than 50%, after its Pokemon Go mobile game became an instant hit.
South32, which owns the world’s largest silver and lead mine, surged to a one-year high in Sydney after Credit Suisse said it expects the company to return cash to shareholders.
Futures on the S&P 500 added 0.4% following the gauge’s 0.3% advance to an all-time high in the last session. Alcoa unofficially kicked off the US earnings season after markets closed on Monday, reporting profit for the second quarter that topped analysts’ estimates.
Currencies
Japan’s currency fell 0.8% to ¥103.58/$, after sliding 2.3% in the last session.
Sunday’s election, which saw Abe’s ruling group score a convincing victory in the upper house, “opens up the scope for sweeping reforms,” said Mark McCormick, North American head of foreign-exchange strategy at Toronto-Dominion Bank. "The Bank of Japan is likely to add to the macroeconomic stimulus package by easing monetary policy along with a more supportive fiscal environment.”
The pound rose 1%, its biggest gain of the month, after UK Prime Minister David Cameron said his replacement would be installed by Wednesday night, lifting the uncertainty over the nation’s leadership following the EU vote. Theresa May is the sole candidate to replace him after Conservative Party leadership hopeful Andrea Leadsom announced her withdrawal from the contest on Monday.
The Australian dollar rallied 1.2%, the best performance among 31 major currencies, as a report showed business confidence picked up last month and investors favoured higher-yielding currencies. The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, fell 0.4% after rising 0.5% on Monday.
While Friday’s better-than-estimated US payrolls data spurred an increase in bets on the Fed raising rates this year, the odds of a hike by December are just 29%, from 50% a month ago, according to futures trading tracked by Bloomberg.
Commodities
Crude oil climbed 0.9% to $45.14 a barrel in New York before data forecast to show US inventories fell for an eighth week.
Nickel jumped 2.4% to $10,285 a metric ton in London amid speculation there will be supply cuts in the Philippines, the biggest ore producer.
The nation’s government has put mines on notice that operations falling short of environmental and welfare standards will be shut down and Goldman Sachs sees the price climbing to $12 000 over the next six months assuming a quarter of the nation’s output is taken out of the market. Copper, lead and zinc all gained more than 1%.
Steel rebar jumped as much as 5.4% in Shanghai as the production hub of Tangshan city in China’s Hebei province was said to be restricting output as part of efforts to improve the local air quality ahead of memorial events to mark the 40th anniversary of one of China’s deadliest earthquakes. Iron ore climbed 4.6% in Singapore.
Palm oil fell 1.4% in Kuala Lumpur, where it is on the cusp of entering a bear market. Inventories in Malaysia are set to increase for the first time since November, according to a Bloomberg survey, while a growers’ group estimates June production to have climbed 10% from a month earlier.
Bonds
Sovereign bonds declined as investors favored riskier assets. The yield on US Treasuries due in a decade increased by four basis points to 1.47%, after climbing seven basis points on Monday as an auction of three-year notes attracted the weakest demand since 2009. Rate on similar-maturity bonds in Australia and Germany rose four basis points to 1.95% and minus 0.13%, respectively.
Kathleen Gaffney, whose Eaton Vance Bond Fund is beating all of its peers this year after rebounding from a loss, warned Treasuries may snap back from a record-setting rally that drove 10- and 30-year yields to all time-lows in the past week. Demand for the securities strengthened as investors sought alternatives to the negative yields offered by debt in Germany and Japan.
“An unwind in the Treasury market” is going to happen at some point, Gaffney, who is based in Boston, said Monday on Bloomberg Television. “With everyone jumping on board with the yield grab, it’s going to be really tough to get out at just the right time.”
India’s bonds rallied, pushing their yield down by six basis points to 7.33%. The rally was “sparked” by hopes that the central bank will adopt a more dovish policy once a new governor takes over, said Vijay Sharma, executive vice-president for fixed income at PNB Gilts in New Delhi.
