Asian shares edge up, buoyant euro holds its gains
SINGAPORE: Asian stocks edged slightly higher on Monday, while the European Central Bank’s apparent equanimity at the euro’s nearly two-year highs left the dollar languishing.
European markets are expected to open mixed, with financial spreadbetter CMC Markets predicting Britain’s FTSE 100 to open 0.1 per cent lower, Germany’s DAX to open little changed, and France’s CAC 40 to start the day up 0.1 per cent.
MSCI’s broadest index of AsiaPacific shares outside Japan reversed earlier losses to edge up 0.2 per cent.
Chinese bluechips and the Shanghai Composite were both up 0.3 per cent. Hong Kong’s Hang Seng added 0.5 per cent. But Japan’s Nikkei dropped 0.6 per cent, pressured by a stronger yen. Australian shares retreated 0.7 per cent and South Korea’s KOSPI edged down 0.1 per cent.
Despite a pullback in Asia-Pacific stocks, sentiment remains solid, said Jim McCafferty, head of equity research for Asia Pacific at Nomura.
“The first three weeks of July have seen continuation of strong first half performance,” McCafferty said. “We are just three weeks in to the second half of the year and investors are continuing to like the Asia-Pacific story.”
On Friday, global stocks ended a 10day winning streak, taking a breather from a rally that had propelled them to a record high in the previous session. The index was flat on Monday.
Wall Street indexes ended on Friday flat to about 0.15 per cent lower, as disappointing earnings from General Electric and energy shares weighed.
European shares also closed lower, with Germany’s DAX slumping 1.7 per cent, hurt by the euro’s strength.
The euro was trading 0.1 per cent higher at $1.16715 on Monday, just a whisker below a nearly two-year high of $1.1684 hit earlier in the session.
ECB President Mario Draghi’s comments on Thursday, which conspicuously avoided citing the euro’s recent strength as a problem, emboldened traders convinced the central bank will begin tapering its bond-buying programme later this year.
The dollar index, which tracks the greenback against a basket of tradeweighted peers, crept higher but remained subdued on Monday.
After touching 93.823, its lowest level since June 2016 early on Monday, it edged up to 93.880, marginally above Friday’s close. The dollar continued to slide against the yen, however, retreating 0.1 per cent to 111.020 yen.
Markets are awaiting the Federal Reserve’s meeting on Tuesday and Wednesday for an update on its plan to start normalising its balance sheet.
“All eyes will be on the Fed this week, with market participants eager to see if the Fed formally announces the start of its balance sheet normalisation plan or opts to wait until September,” Michala Marcussen, global head of economics at Societe Generale, wrote in a note.
“We are in the September camp, but we acknowledge that it is a coin toss between this week’s meeting and the next one.”
Gold shone on the dollar’s weakness and a decline in risk appetite, with spot gold just slightly lower at $1,254.31 an ounce, retaining most of Friday’s 0.8 per cent jump, and slightly below a onemonth high hit earlier.