Asian shares advance, dollar supported by rate hike bets
TOKYO: Asian shares rose on Thursday as investors were encouraged by President Donald Trump’s less combative tone in his first speech to Congress, which sent Wall Street stocks sharply higher, while growing bets on a US rate hike this month buoyed the dollar.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent while Japan’s Nikkei rose 1.3 percent to a 14-month high.
European shares could dip after the STOXX Europe 600 benchmark index hit a 15-month high on Wednesday, with spread-betters seeing a fall of 0.1 percent in Germany’s DAX, Britain’s FTSE and France’s CAC.
MSCI’s broadest gauge of the world’s stocks covering 46 countries scaled a record high, a day after it rose nearly 1 percent for its biggest daily gain in almost three months.
On Wall Street, the Dow Jones Industrial Average blasted through the 21,000-point mark for the first time. Both the Dow and the S&P 500 rallied around 1.4 percent.
Trump pledged to deliver “massive” tax relief to the middle class and corporate tax cuts, to spend heavily on infrastructure and to ease regulations — steps that have helped to push US stocks higher since his election victory in November.
While Trump gave few new details on his tax or spending plans, investors were encouraged by what they saw as a less confrontational tone as he tries to push his growth agenda through a Congress reluctant to widen the government’s budget deficit.
More to the point, his stimulus plan comes as the global economy is picking up momentum.
The J.P. Morgan Global manufacturing PMI hit its highest levels in nearly six years in February.
“Trumpflation may be a misnomer. The uptick in manufacturing predates the election. It continued in February,” ING said in a note, pointing to generally strong factory activity readings around the world last month. “It’s better to be lucky than good. We think President Trump may be lucky in holding office when the overhang of debt and fear from the Global Financial Crisis lifts.”
A rate hike by the Federal Reserve later this month also would signal policymakers’ growing confidence in US and global economic expansion.
“The US economy is strong enough to allow the Fed to raise rates. And then we are going to have one trillion dollars in public spending,” said a trader at a European bank.
“Under such conditions, we are likely to see a gradual rise in US stocks, with volatility remaining low, until the Fed overkills the economy,” he said.
The S&P financial index soared 2.84 percent after a few key Federal Reserve officials including New York Fed President William Dudley and San Francisco Fed President John Williams, hinted at an interest rate hike this month.