Asia mar­kets end strong on in­vestors’ op­ti­mism

Gulf Times Business - - BUSINESS -

The up­beat tone that char­ac­terised this week helped Asian mar­kets to fresh gains yes­ter­day, with Hong Kong chalk­ing up a sixth straight day of rises.

In­vestors glob­ally have been rid­ing a wave of op­ti­mism since the head of the Fed­eral Reserve in­di­cated it will likely slow its pace of in­ter­est rate hikes, while there were also signs that China and the US could even­tu­ally reach a trade deal.

And the gains were not lim­ited to eq­ui­ties.

Oil is up about 20% from 17-month lows at the end of De­cem­ber and high­yield­ing cur­ren­cies were be­ing sup­ported by a new-found de­mand for riskier as­sets.

Yes­ter­day’s rally fol­lowed an­other pos­i­tive lead from Wall Street, where deal­ers brushed off dis­ap­point­ing re­tail fig­ures as they fo­cused on the prospect that bor­row­ing costs will not rise as much as pre­vi­ously feared.

Fed min­utes Wed­nes­day showed pol­i­cy­mak­ers are happy to hold off any more rate hikes as they as­sess the state of the econ­omy, back­ing up dovish com­ments last week by its head Jerome Pow­ell.

There was a slight wob­ble in New York after Pow­ell on Thurs­day sug­gested the bank’s se­cu­ri­ties hold­ings should be “sub­stan­tially smaller” – a sell-off by the Fed of such as­sets would lift in­ter­est rates.

But the gen­eral mood re­mained up­beat as a num­ber of other top Fed of­fi­cials in­di­cated they were happy to see a break in hikes.

“Mar­kets are ul­ti­mately wait­ing to see if the Fed’s new rhetoric re­lated to step- ping back, does it trans­late to ac­tion, and does the Fed ac­tu­ally pause at some point,” Mor­gan Stan­ley econ­o­mist Dan Skelly told Bloomberg TV in New York.

“That’s re­ally what we are wait­ing for to see a sus­tained move higher” in stocks, he said.

In Asia, Hong Kong rose 0.6% at 26,667.27 – mean­ing it has risen more than 6% since last Thurs­day’s close and is at a one-month high – while Shang­hai ended up 0.7% at 2,553.83 and Tokyo added 1% to 20,359.70 points at the close yes­ter­day.

Sin­ga­pore and Seoul each rose 0.6%, Taipei jumped 0.4% while there were also gains in Welling­ton, Bangkok and Jakarta, though Syd­ney, Manila and Mum­bai eased. Mar­kets are now await­ing the next de­vel­op­ment in the Chin­aUS trade spat after three days of talks this week that both sides in­di­cated had been pro­duc­tive.

Bloomberg re­ported, with­out nam­ing sources, that that top eco­nomics diplo­mat and Vice Pre­mier Liu He will visit Wash­ing­ton at the end of the month for high-end talks with Trade Rep­re­sen­ta­tive Robert Lighthizer and Trea­sury Sec­re­tary Steven Mnuchin.

The Chi­nese yuan is one of the main ben­e­fi­cia­ries of the progress in trade talks and softer Fed out­look, with the unit sit­ting at a more than five-month high against the dol­lar, de­spite a string of weak data point­ing to a growth slow­down in the world’s num­ber-two econ­omy.

How­ever, ob­servers were scep­ti­cal about how long it will main­tain its strength.

“The yuan can hold up fine” un­til the Fed hikes rates again, trade ten­sions re­sume and Bei­jing ramps up its stim­u­lus mea­sures, Michael Ev­ery, head of Asia fi­nan­cial mar­kets re­search at Rabobank in Hong Kong, said.

“It’s a ‘when’ and not an ‘if’ for when it re­v­erses di­rec­tion again and we test new lows”.

Other re­gional units were mixed yes­ter­day but were mostly hold­ing up after a week of gains.

How­ever, Mizuho Se­cu­ri­ties warned in a client note about the pos­si­ble im­pact from the on­go­ing US govern­ment shut­down, which shows no signs of end­ing, and the Brexit vote next week that the govern­ment is likely to lose.

Oil prices were mixed at the end of one of the best week for the two main con­tracts in two years.

The strong gains were much-needed after losses of more than 40% from fouryear be­tween Oc­to­ber and the end of De­cem­ber.

“Pos­i­tive vibes on US-China trade talks, a re­lief rally in global eq­ui­ties, op­ti­mism in Opec-led cuts and fall­ing US rig count have raised oil prices sig­nif­i­cantly in the new year,” said Phillip Fu­tures com­modi­ties an­a­lyst Ben­jamin Lu.

Pedes­tri­ans walk past Tokyo Stock Ex­change. The up­beat tone that char­ac­terised this week helped Asian mar­kets to fresh gains, with the TSE adding 1% to 20,359.70 points yes­ter­day.

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