Emerging Asia propelling world stocks to a new high

A WEAK US dollar and upbeat Chinese data lifted emerging-market and Asian shares to levels not seen in more than two years and global stocks to an all-time high.

With the world’s most widely used currency near a 10-month low and bond yields slipping, it is cheaper for emerging countries to service their debts, and investor appetite for riskier assets such as equities has risen. After decent gains in Asia on the back of positive signs from global economic powerhouse China, MSCI’s world stocks index looked set for a ninth day of gains, which would mark its longest winning streak since October 2015.

“Most emerging markets are doing quite well at the moment, especially in Asia. The figures for China are positive,” said Marijke Zewuster, the head of emerging market research at ABN AMRO. “If you look at the underlying figures, they are relatively strong at the moment.”

The dollar dropped sharply on Tuesday after the collapse of a health-care bill dealt a blow to US President Donald Trump’s ability to deliver promised fiscal reforms. The greenback could muster little more than tentative gains yesterday.

Against a basket of other major currencies, it was up 0.2% at 94.782, but still down about 7% on the year and within sight of Tuesday’s low of 94.476.

Analysts said the slight gains in the dollar were down to expectations the European Central Bank (ECB) and the Bank of Japan (BOJ) may strike dovish tones when they meet today, which could dent recent strength in the euro and the Japanese yen.

The ECB is expected to adjust its language, but substantive changes to policy will probably come later in the year. The BOJ is expected to raise its growth forecast but cut its inflation outlook. The euro inched down against the dollar, having made a 14-month top on Tuesday. Yields were broadly lower across the euro zone for a second day, with US Treasury yields trading near three-week lows. – Reuters