Asian shares hit 6.5 year high
TOKYO - Asian shares touched a six-and-half-year peak yesterday and the dollar was steady, with investors waiting for second quarter US growth data as well as a US Federal Reserve meeting that some believe might yield a more hawkish policy outlook.
The Fed will not be updating its economic forecasts and Chair Janet Yellen will not hold a news conference following the two-day policy meeting, leaving investors focus squarely on a statement scheduled to be released at 2 PM (18:00 GMT).
Ahead of that, financial spreadbetters predicted softer starts in Europe, with Britains FTSE 100.FTSE seen opening 2 points lower, or down 0.03 per cent; Germanys DAX to open 18 points lower, or down 0.2 per cent; and Frances CAC 40 to open 9 points lower, or down 0.2 per cent.
Our index opening calls are shaping up for a modestly lower open, and if sanctions against Russia have caused investor outflows from Europe then the new sanctions from the EU could see this headwind continue, Chris Weston, chief market strategist at IG, said in a note.
Tuesday brought further EU and US sanctions against Russia over Moscows support for rebels in eastern Ukraine.
MSCIs broadest index of Asia-Pacific shares outside Japan shrugged off early losses in the wake of a decline on Wall Street to rise 0.5 per cent to its highest level since January 2008, while Australian shares climbed to their highest level since June of that year.
In the end its really part of a global rally, its been underpinned by the US, where economic growth is seen to be improving albeit slowly, and earnings growth in Australia looks reasonable at this stage, said Matthew Sherwood, head of investment market research at Perpetual in Sydney.
Japans Nikkei stock average ended up 0.2 per cent, as upbeat earnings offset weaker-than-expected industrial production data which cast doubts over the strength of an expected thirdquarter economic recovery.
Output fell 3.3 per cent in June, the fastest rate since the devastating earthquake and tsunami in March 2011, as companies put on the brakes due to a pile-up in inventories. But manufacturers expect output to rise in the coming months.
Macro funds including overseas pension funds are shifting to Japanese shares from US shares as valuations of Japanese shares are cheaper, said Kyoya Okazawa, head of global equities at BNP Paribas.
On Wall Street overnight, a weak outlook from courier company United Parcel Service (UPS.N) triggered a broad selloff, pushing the S&P 500.SPX below its 14-day moving average for a second straight day.
Still, almost 70 per cent of the S&P 500 companies that have reported already have topped earnings expectations, according to Thomson Reuters data, which is well above the longterm average of 63 per cent. More than half of companies have reported results, and over 63 per cent of them have topped revenue forecasts, above the long-term average of 61 per cent.
Fed eyes cuts
Later yesterday, the Fed was expected to cut its monthly bondbuying program by another $10 billion.
Also later in the session, the Commerce Department was expected to report that the economy grew at a 3.2 per cent annual pace in the second quarter, after it shrank 2.9 per cent in the previous quarter.
On Friday, the Labor Departments key nonfarm payrolls are expected to rise by 231,000 in July after an increase of 288,000 in June. The jobless rate is expected to hold steady at 6.1 per cent.
With US unemployment dropping over the last few months and inflation firming, some believe the US central bank could adjust its wording to suggest its willingness to hike interest rates sooner rather than later as the bank approaches its full employment mandate.
The yield on the benchmark 10-year US Treasury note US10YT RR stood at 2.467 per cent in late Asian trade, not far from its US close of 2.462 per cent on Tuesday, when it got support from German, Italian and Spanish government debt yields all hitting record lows.
Ten-year German government bond yields, the benchmark for euro zone borrowing costs, sank as low as 1.12 per cent on Tuesday.
That helped the dollar rise to eight-month highs against the euro, which extended the drop as low as $1.3403 EUR in Asian trade and was last steady at $1.3407.
Against the yen, the dollar was steady on the day at 102.12 JPY after it broke above the 102 level on Tuesday for the first time since early July.
The dollar index, which tracks the US unit against a basket of six major rivals, was last at 80.225, after touching a six-month high of 81.245 on Tuesday as the euro cratered.
US crude CLc1 edged up around 0.1 per cent on the day to $101.07 a barrel after touching an intraday low of $100.37 on Tuesday, its lowest since mid-July.