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