Shares up as US, China data eases worries

2012-10-18 07:49

Tokyo - Asian shares struck a seven-month high on Thursday as worries about a sharper slowdown in global growth eased after a slew of Chinese data signalled stabilisation in the world's second largest economy, and the US produced positive economic news.

China's third-quarter gross domestic product grew 7.4% from a year earlier, the slowest pace since the first quarter of 2009 and the seventh straight quarter of slower growth, but matching expectations.

Other Chinese data such as fixed asset investment, retail sales and industrial output slightly exceeded forecasts.

"This is within expectations, the economy is showing signs of stabilising, that is good news," said Dong Tai, economist at Credit Suisse in Hong Kong. "We think that with rebounding property markets, stabilising export orders, resuming consumption, we probably have seen the bottom of the economy."

The MSCI index of Asia-Pacific shares outside Japan gained 0.5%, rising for a third day in a row, with its energy and materials leading the increase.

Hong Kong shares rose 0.7% and Shanghai shares advanced 1.2% Australian shares were up 0.7% at a 15-month high, supported by the resources sectors which drew strength from signs the slowdown is drawing to an end in China, Australia's largest export market.

"Investors are adding more risk to their portfolio right now, with funds trying to improve their performance as the year comes to a close," said Alan Lam, Julius Baer's Greater China equity analyst.

European shares will likely edge higher, with financial spreadbetters expecting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX to open 0.2% higher. US stock futures were steady.

The commodities-sensitive Australian dollar touched a two-week high of $1.0397 after the Chinese data, and last traded at $1.0380.

The benchmark Thomson Reuters-Jefferies CRB index has recovered less than one-third of its drop from its recent peak in September, offering more scope on the upside.

"The data for September suggests China's economy likely bottomed in July-August and is set to recover, and this will help ease fears about further downside risks to the Chinese economy," said Hirokazu Yuihama, a senior strategist at Daiwa Securities. "There aren't clear signs that demand from China is picking up but sentiment for commodities is improving and this should eventually support growth-sensitive assets," he said.

Japan's Nikkei average jumped 2% to its highest in nearly three weeks on a weaker yen.

Yen slips

The dollar rose to a one-month high of ¥79.22, with traders keen to see if it will test its 200-day moving average, which stands around ¥79.40.

"The broad USD is battling between its use as a funding currency to invest in emerging markets, and a rise in its value linked to higher yields and growth expectations," Societe Generale said in a research note.

"For now this translates into a higher USD/JPY as the most yield sensitive currency," the note said, explaining the dollar's advance against the yen

While both the yen and the dollar tend to weaken when the tone for risk assets brightens, the yen's fall against other currencies such as the Australian dollar and the euro helped deepen the Japanese currency's loss against the greenback.

Osamu Takashima, chief FX strategist at Citibank in Tokyo, said the yen's weakness is also related to concerns that Japan's exports may suffer due to a sharp fall in sales in China following after a territorial row between the two countries.

The dollar's appeal increased as benchmark 10-year US Treasury yields jumped to a one-month high of 1.81% on Wednesday for its biggest two-day rise since late July, after data showing US housing starts surged 15% in September, the fastest pace in over four years.

The housing report followed a fall in the US jobless rate and strong retail sales, lifting Wall Street despite concerns that sluggish world economic growth would curtail corporate America's year-long streak of profit growth.

The euro inched down 0.2% to $1.3096, after reaching a one-month high of $1.3140 on Wednesday.

While hopes for highly-indebted Spain to ask for aid remain intact, investors were cautious ahead of a meeting of European leaders in Brussels on Thursday and Friday, eyeing possible discussions over bailouts for struggling Spain and Greece.

European leaders will try to bridge deep differences over plans for a banking union at the summit, but no substantial decisions are expected, reviving concerns about complacency in tackling the three-year-old debt crisis.

Clear decisions on helping Cyprus, Greece and Spain may also only come at a finance ministers' meeting next month, officials say.

Asian credit markets firmed, tightening the spread on the iTraxx Asia ex-Japan investment-grade index by 4 basis points.

US crude futures were steady at $92.14 a barrel while Brent inched up 0.3% to $113.56.