Asian stocks hit 17-month peak on risk appetite
Wednesday, 6 January 2010
HONG KONG, Jan 5 (Reuters): Asian stocks rose to a 17-month high Tuesday as growing confidence about the prospects for the global economy drew investors to riskier assets and away from the dollar, which extended its weak start to the year.
European shares were set to open slightly lower, according to financial spreadbetters, while US equity futures were virtually flat.
The dollar dropped 0.4 per cent against a basket of major currencies, extending Monday's slide after upbeat manufacturing data from the United States, India and China bolstered optimism about a global recovery and encouraged buying of higher-yielding currencies, commodities and stocks.
"Investors are seeking more risks thanks to better economic conditions," said Tsutomu Soma, senior manager of foreign securities at Okasan Securities in Tokyo.
However, he said the optimism could change if US job data due Friday disappoints.
"Investors feel they need to have the employment data to confirm the US economy is improving solidly," Soma said.
Japan's Nikkei share index rose 0.25 per cent on the day to close at a 15-month high, helped by resource-related shares after the price of copper, palladium and platinum surged Monday to their highest levels since 2008.
However, stocks came off earlier highs as a stronger yen hurt exporters.
The MSCI index of Asia Pacific stocks traded outside Japan, which rallied about 68 per cent last year, was up 1.3 per cent at levels last seen in July 2008.
Investors poured a record $19 billion into Asia ex-Japan equity funds last year, global fund tracker EPFR said Tuesday, as the region led a recovery in the global economy.
A string of bullish data from China, India and South Korea since the start of this year is encouraging investors to add exposure to Asian assets, although uncertainty about the sustainability of economic recovery in Western economies poses a risk for equities globally, analysts say.
The strength of commodity prices lifted stocks in resource-rich Australia, where mining stocks helped drive the benchmark S&P/ASX 200 index up one per cent.
The Thomson Reuters index of Asian shares outside of Japan rose one per cent.
A rally in US shares Monday boosted investment sentiment in Asia, which relies heavily on US end demand for its exports industries.
US stocks rallied on their first trading day of 2010 after the Institute for Supply Management manufacturing index for December hit its highest level since April 2006.
However, the economic recovery in the United States, as well as in Europe, was tepid and so could limit the upside potential of equities, said David Spry, research manager at FW Holst in Australia.
"I don't think we're going to get a strong, sustained upswing until those economies start to contribute a bit more down the track," Spry said.
Uncertainty about Friday's US jobs report for December capped buying of US Treasuries in Asia. The November report showed a surprisingly small drop in jobs so further signs of an improving labour market in this week's report could trigger expectations for an early rise in US interest rates.
The median forecast in a poll was for the report to show a fall of 8,000 jobs in December.
European shares were set to open slightly lower, according to financial spreadbetters, while US equity futures were virtually flat.
The dollar dropped 0.4 per cent against a basket of major currencies, extending Monday's slide after upbeat manufacturing data from the United States, India and China bolstered optimism about a global recovery and encouraged buying of higher-yielding currencies, commodities and stocks.
"Investors are seeking more risks thanks to better economic conditions," said Tsutomu Soma, senior manager of foreign securities at Okasan Securities in Tokyo.
However, he said the optimism could change if US job data due Friday disappoints.
"Investors feel they need to have the employment data to confirm the US economy is improving solidly," Soma said.
Japan's Nikkei share index rose 0.25 per cent on the day to close at a 15-month high, helped by resource-related shares after the price of copper, palladium and platinum surged Monday to their highest levels since 2008.
However, stocks came off earlier highs as a stronger yen hurt exporters.
The MSCI index of Asia Pacific stocks traded outside Japan, which rallied about 68 per cent last year, was up 1.3 per cent at levels last seen in July 2008.
Investors poured a record $19 billion into Asia ex-Japan equity funds last year, global fund tracker EPFR said Tuesday, as the region led a recovery in the global economy.
A string of bullish data from China, India and South Korea since the start of this year is encouraging investors to add exposure to Asian assets, although uncertainty about the sustainability of economic recovery in Western economies poses a risk for equities globally, analysts say.
The strength of commodity prices lifted stocks in resource-rich Australia, where mining stocks helped drive the benchmark S&P/ASX 200 index up one per cent.
The Thomson Reuters index of Asian shares outside of Japan rose one per cent.
A rally in US shares Monday boosted investment sentiment in Asia, which relies heavily on US end demand for its exports industries.
US stocks rallied on their first trading day of 2010 after the Institute for Supply Management manufacturing index for December hit its highest level since April 2006.
However, the economic recovery in the United States, as well as in Europe, was tepid and so could limit the upside potential of equities, said David Spry, research manager at FW Holst in Australia.
"I don't think we're going to get a strong, sustained upswing until those economies start to contribute a bit more down the track," Spry said.
Uncertainty about Friday's US jobs report for December capped buying of US Treasuries in Asia. The November report showed a surprisingly small drop in jobs so further signs of an improving labour market in this week's report could trigger expectations for an early rise in US interest rates.
The median forecast in a poll was for the report to show a fall of 8,000 jobs in December.