Euro­pean stocks drop as Asia shares rally

The Pak Banker - - MARKETS/SPORTS -

Asian shares ad­vanced while eq­ui­ties in Europe slid amid spec­u­la­tion over whether cen­tral banks will come to the res­cue of tur­bu­lent fi­nan­cial mar­kets. Oil dropped af­ter its steep­est two-day gain since 2008 as gold rose with the South Korean won. The gains in Asia are lift­ing the MSCI All-Coun­try World In­dex for a third day, af­ter a 2 per­cent jump in U.S. shares on Fri­day con­trib­uted to the gauge's best day since June 2012. U.S. crude slid below $32 a bar­rel as the world's big­gest crude ex­porter said it's keep­ing up en­ergy in­vest­ments, while gold rose 0.5 per­cent. The won strength­ened a se­cond day as the Ja­panese yen in­creased.

Euro­pean Cen­tral Bank Pres­i­dent Mario Draghi gave mar­kets a lift amid the worst start to a year on record for global stocks. His in­di­ca­tion that stim­u­lus could be boosted as soon as March, and spec­u­la­tion China could ease pol­icy to soothe in­vestors, fu­eled a surge across risk-as­set classes at the end of last week, aided by oil's re­cov­ery. While Bank of Ja­pan Gov­er­nor Haruhiko Kuroda played down the im­pact of the re­cent gy­ra­tions, econ­o­mists are pre­dict­ing the Fed­eral Re­serve will hold fire on in­ter­est rates when it meets this week. "There will be some wait­ing and see­ing among pol­icy mak­ers un­til they know how this mar­ket volatil­ity will af­fect the global econ­omy," Michael McCarthy, chief strate­gist at CMC Mar­kets in Syd­ney, said by phone. "Given the de­pres­sion in the mar­kets, there's scope for the mar­ket to add to Fri­day's gains. We've got a very event­ful week, with the BOJ and Fed meet­ings, so there's a lot for in­vestors to re­act to. Volatil­ity is likely to con­tinue."

The Stoxx Europe 600 In­dex slipped 0.5 per­cent as of 8:23 a.m. in Lon­don. The MSCI Asia Pa­cific In­dex gained 1.2 per­cent af­ter its 3.5 per­cent surge on Fri­day trimmed its third straight weekly drop to 1.4 per­cent. Ja­panese shares rose a se­cond day, with the Topix in­dex in­creas­ing 1.3 per­cent to its high­est close since Jan. 15.

En­ergy pro­duc­ers and banks drove Aus­tralia's S&P/ASX 200 In­dex up 1.8 per­cent, while New Zealand's S&P/NZX 50 In­dex rose 0.9 per­cent and the Kospi in­dex in Seoul gained 0.7 per­cent.

In Hong Kong, the Hang Seng and Hang Seng China En­ter­prises in­dexes rose 1.4 per­cent and 0.8 per­cent, re­spec­tively. The Shang­hai Com­pos­ite In­dex climbed 0.8 per­cent. The gauge, whose gy­ra­tions in the first proper week of trad­ing this year sparked the global sell­off, ended Fri­day up 1.3 per­cent as China sig­naled it would curb over­ca­pac­ity in in­dus­tries such as coal that have been drag­ging down eco­nomic growth. Less cer­tain is the longer-term out­look for risk as­sets glob­ally, ac­cord­ing to Philip Borkin, a se­nior econ­o­mist in Auck­land at ANZ Bank New Zealand Ltd.

"One of my col­leagues put it quite aptly re­cently when he stated that fi­nan­cial mar­kets were al­most like a tantrum­ing tod­dler, and that cen­tral banks have been at­tempt­ing to con­sole them by re­ward­ing them with an­other toy," Borkin said in a client note Mon­day. "Any par­ent would tell you that that is hardly the way to en­cour­age long-last­ing good be­hav­ior. At some stage, par­tic­u­larly if real ac­tiv­ity data are still hang­ing in there OK, some tough love is re­quired."

The S&P 500 ad­vanced 2 per­cent Fri­day, the most since Dec. 4, to 1,906.90, while the Dow Jones In­dus­trial Av­er­age re­gained 211 points. Fu­tures on the S&P 500 were down 0.3 per­cent on Mon­day.

The won led gains among Asian cur­ren­cies, climb­ing 0.5 per­cent to 1,194.20 a dol­lar af­ter jump­ing 1.1 per­cent on Fri­day. It posted the big­gest two-day gain since Oc­to­ber be­fore South Korea re­leased eco­nomic growth num­bers on Tues­day. New Zealand's dol­lar fell 0.2 per­cent as in­vestors mulled the out­look for mon­e­tary pol­icy. While the Re­serve Bank of New Zealand is pro­jected to keep rates on hold at a re­view Thurs­day, some econ­o­mists are pre­dict­ing fur­ther re­duc­tions be­fore the end of June. The Aussie was down 0.3 per­cent.

The yen was up 0.3 per­cent at 118.38 per dol­lar fol­low­ing a 0.9 per­cent de­cline Fri­day that capped its first weekly drop in three weeks. Gov­er­nor Kuroda said in an in­ter­view with Bloomberg TV in Davos that the tur­bu­lence in fi­nan­cial mar­kets hadn't af­fected cor­po­rate be­hav­ior "un­duly." He did, how­ever, em­pha­size that the cen­tral bank is "care­fully" watch­ing mar­kets for any po­ten­tial im­pact on the real econ­omy.

Data re­leased Mon­day showed Ja­pan's an­nual trade deficit nar­rowed al­most 80 per­cent in De­cem­ber from a record as the cost of en­ergy im­ports dipped and weak­ness in the yen spurred some gains in ex­ports. Econ­o­mists ex­pect the BOJ to keep stim­u­lus at cur­rent lev­els later this week. West Texas In­ter­me­di­ate crude fu­tures in New York were down 1.2 per­cent at $31.80 a bar­rel while Brent in Lon­don traded 49 cents lower at $31.69 a bar­rel. Front-month prices of WTI capped a 21 per­cent ad­vance over two ses­sions at the close Fri­day af­ter the Fe­bru­ary con­tract ex­pired Wed­nes­day at $26.55 a bar­rel, the low­est since 2003.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.