Stocks rally be­fore BoJ, Fed meet­ings; Aussie de­clines with oil

The Pak Banker - - MARKETS/SPORTS -

Stocks rose in Asia and Europe, ex­tend­ing a global rally be­fore cen­tral banks in two of the world's three big­gest economies re­view pol­icy this week. Aus­tralia's dol­lar led de­clines among com­mod­ity cur­ren­cies as oil fell.

The MSCI Asia Pa­cific In­dex and the Stoxx Europe 600 In­dex were headed for their high­est closes in two months. Chi­nese eq­ui­ties jumped af­ter the new head of the se­cu­ri­ties reg­u­la­tor sig­naled he will main­tain state sup­port for shares. Turkey's lira weak­ened af­ter a deadly bomb at­tack in Ankara, while the rand dropped as a South African po­lice unit said Fi­nance Min­is­ter Pravin Gord­han had been asked to as­sist with an in­ves­ti­ga­tion. Aus­tralia's dol­lar re­treated from an eight-month high and Malaysia's ring­git weak­ened as Ira­nian plans to boost oil pro­duc­tion pushed crude prices lower.

Cen­tral banks are be­ing re­lied on to re­vive the global econ­omy af­ter a wors­en­ing growth out­look wiped al­most $9 tril­lion off the value of eq­ui­ties world­wide this year through mid-Fe­bru­ary. The bulk of the stock-mar­ket losses have been clawed back, helped by mon­e­tary eas­ing in China and last week's an­nounce­ment of un­prece­dented stim­u­lus by the Euro­pean Cen­tral Bank. The Bank of Ja­pan, which adopted a neg­a­tive in­ter­est rate in Jan­uary, will con­clude a pol­icy re­view on Tues­day and a Fed­eral Re­serve meet­ing ends Wed­nes­day.

"Cen­tral banks are go­ing to be dom­i­nat­ing mar­ket sen­ti­ment," Matthew Sher­wood, head of in­vest­ment strat­egy at Per­pet­ual Ltd. in Syd­ney, which man­ages about $21 bil­lion, told Bloomberg Ra­dio. "That could be enough for the risk rally to con­tinue, but I think it is start­ing to run out of steam. The Fed is go­ing to be front and cen­ter."

Ja­pan's cen­tral bank will keep the an­nual ex­pan­sion of the mon­e­tary base at 80 tril­lion yen ($702 bil­lion), ac­cord­ing to 35 of 40 econ­o­mists sur­veyed by Bloomberg. All but two pre­dict the pol­icy rate will re­main at mi­nus 0.1 per­cent. Fed funds fu­tures in­di­cate there's only a 4 per­cent chance the Fed will hike bor­row­ing costs this week, down from 12 per­cent at the start of this month. In China, cen­tral bank Gov­er­nor Zhou Xiaochuan said "ex­ces­sive" stim­u­lus wouldn't be re­quired to achieve the na­tion's eco­nomic growth goal of at least 6.5 per­cent over the next five years.

The Stoxx Europe 600 In­dex rose 1 per­cent as of 8:18 a.m. Lon­don time, be­fore the re­lease of Jan­uary in­dus­trial out­put for the euro area. Pro­duc­tion is ex­pected to have in­creased 1.7 per­cent from De­cem­ber, when it fell 1 per­cent, a Bloomberg sur­vey shows. Fu­tures on the Stan­dard & Poor's 500 In­dex were lit­tle changed, af­ter the bench­mark surged 1.6 per­cent on Fri­day to erase its loss for the year.

The MSCI Asia Pa­cific In­dex climbed 0.9 per­cent. Ja­pan's Topix added 1.5 per­cent as data showed the coun­try's ma­chine or­ders jumped 15 per­cent in Jan­uary from a month ear­lier, beat­ing De­cem­ber's 4.2 per­cent in­crease and higher than econ­o­mist fore­casts for a 1.9 per­cent gain. "The ma­chine or­ders re­sults should be a boost to stocks," said Masaaki Ya­m­aguchi, a Tokyo-based equity mar­ket strate­gist at No­mura Hold­ings Inc. "It's not just this one in­di­ca­tor that's mov­ing the mar­ket, but glob­ally we're mov­ing to­ward a more risk-on stance."

The Shang­hai Com­pos­ite In­dex ral­lied 1.8 per­cent, its big­gest gain in more than a week. Liu Shiyu, chair­man of the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion, said it was too early to think about the state res­cue fund leav­ing the mar­ket and vowed to step in "de­ci­sively" if needed to curb panic. Prop­erty de­vel­oper China Vanke Co. jumped 10 per­cent in Hong Kong, the most since 2014, af­ter say­ing it plans to pay as much as 60 bil­lion yuan ($9.2 bil­lion) for a stake in Shen­zhen's ur­ban tran­sit com­pany. The Bloomberg Dol­lar Spot In­dex, a gauge of the green­back against 10 ma­jor peers, re­bounded 0.2 per­cent af­ter sink­ing last week to its low­est close since Oc­to­ber.

Aus­tralia's dol­lar fell 0.5 per­cent, pac­ing de­clines among the cur­ren­cies of re­source­ex­port­ing na­tions, af­ter Chi­nese in­dus­trial out­put and retail sales data over the week­end added to signs of a slow­down in the world's se­cond-big­gest econ­omy. Malaysia's ring­git lost 0.4 per­cent as a fall­ing oil price dimmed prospects for Asia's only ma­jor net ex­porter of crude. The yuan fell 0.16 per­cent in Hong Kong's off­shore mar­ket and was lit­tle changed in Shang­hai.

Turkey's lira weak­ened 0.5 per­cent af­ter a sui­cide car bomb in Ankara killed at least 34 peo­ple, the cap­i­tal's third at­tack in five months. The rand slid 0.7 per­cent, lead­ing losses among ma­jor cur­ren­cies. South Africa's Di­rec­torate for Pri­or­ity Crime In­ves­ti­ga­tion wants in­for­ma­tion from Fi­nance Min­is­ter Gord­han on what he knew about a so-called rogue unit in the tax agency that in­ves­ti­gated political lead­ers, the Sun­day In­de­pen­dent news­pa­per re­ported, cit­ing a let­ter sent by the po­lice unit's head to the min­is­ter's lawyers.

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