Shares, euro gain ahead of data

2012-08-14 08:15

Tokyo - Asian shares rose on Tuesday as investors hunted for bargains while waiting for more economic figures from Europe and the United States later in the day, after recent data showed the eurozone's debt woes were eroding business activity globally.

Relative optimism persisted to underpin investor sentiment as deteriorating global growth prospects will keep expectations firmly in place for further stimulus steps from policymakers seeking to bolster growth.

After worrying China trade data on Friday and Monday's report showing a slowdown in Japan's economy, investors are now eyeing the eurozone's second-quarter gross domestic product, which is expected to contract, as well as July US retail sales and consumer prices due later in the day.

"As long as we have a mixed bag of data, expectations for more stimulus will remain intact and keep supporting markets," said Hirokazu Yuihama, a senior strategist at Daiwa Securities.

"I think there is a growing sense that the US economy is resilient. Also, with European leaders soon returning from their summer holidays, hopes remain for them to start working on steps towards next month," he added.

European stocks were likely to rise, after taking their sharpest fall in more than a week in thin volume on Monday, and as a 0.1% gain in US stock futures signalled a firm Wall Street start. Financial spreadbetters called the main indexes in London, Paris and Frankfurt to open up as much as 0.5%.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3%, while Japan's Nikkei stock average advanced 0.3% as domestic investors bought companies with favourable returns after a mixed earnings season.

"Foreign buying is keeping the market afloat and stimulus hopes are still playing a large part of it," said Park Sang-hyun, an analyst at HI Investment & Securities, of Korean shares which outperformed the rest of Asia with a 0.9% gain as investors picked up stocks they considered undervalued.

Copper, oil and gold traded in ranges as the dollar's reaction to the data could affect commodity and energy prices.

"The immediate impact of the European growth numbers will be on the forex market and oil will react to that," said Ryoma Furumi, a commodities sales manager at Newedge Japan.

Oil also drew support from intensifying debate in Israel on whether to strike Iran's disputed nuclear programme.

Brent crude inched down 0.1% to $113.44 a barrel while US crude rose 0.2% to $92.93.

Copper and gold marked time before the data, with copper inching down 0.1% to $7 384.75 a tonne and spot gold up 0.2% at $1 612 an ounce.

The euro inched up 0.2% against the dollar to $1.2358 as investors unwound bets for a further euro drop amid a lack of fresh factors, although it remained firmly capped below a one-month high of $1.2444 touched on August 6.

Asian credit markets were subdued, with the spread on the iTraxx Asia ex-Japan investment-grade index flat.

Live in hope

While growth worries weighed on broad assets and prompted investors to take profits, markets were still expecting the European Central Bank to start buying sovereign bonds to lower borrowing costs for Spain, and the US Federal Reserve to expand its monetary easing in coming weeks.

As markets were caught between worries and hopes, a gauge for investor risk aversion continued to improve. The CBOE Volatility index, which measures expected volatility in the Standard & Poor's 500 index over the next 30 days, closed down 7.06% at 13.70 on Monday, its lowest in more than five years.

Analysts have said investors may be switching some funds from safe-haven bonds to stocks, underpinning prices despite a lack of fresh factors.

As policy hopes buoyed risk sentiment over the past week, yields on sovereign debts perceived as safe, including US Treasuries, German bunds and Japanese government bonds have crawled higher, away from record lows or multi-year lows marked before the optimism surfaced.

While the ECB had suggested it could step in again to buy government bonds, albeit under certain conditions, European Union leaders must await the German Constitutional Court's verdict due on September 12 to give an expected green light to the eurozone's permanent bailout fund and the fiscal pact for budget discipline.

Investors will also look for policy clues from the annual meeting of economists and central bankers in Jackson Hole, Wyoming, at the end of the month.