Asian markets rally on growth prospects
MSCI Asia ex-Japan scales highest since August 2011
Asian shares scaled their highest levels since August 2011 over-night after an improving global economic outlook whetted investor appetite for risk, while the yen firmed amid doubts over Japan's commitment to drastic reflation.
Asian shares have been on an uptrend as risks from the euro zone debt crisis and the US fiscal impasse abated and signs of recovery emerged in major economies including China. Corporate earnings have also been generally positive.
“The tide continued to push higher for equity markets across Asia today, with solid leads from Europe and the U.S. enough to keep traders in a buying frame of mind,” said Tim Waterer, senior trader at CMC Markets.
News of new possible mergers boosted US stocks on Tuesday, pinning the benchmark Standard & Poor's 500 Index near a five-year high, while European shares rose after the German ZEW investor sentiment index rose to a three-year high.
European markets will likely consolidate, with financial spread-betters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX would open down 0.1 per cent. US stock futures were flat to suggest a subdued start for Wall Street.
The MSCI's broadest index of Asia-Pacific shares outside Japan added 0.8 percent, up for a third day in a row, led by a 1.9 percent gain in its technology sector. The index has risen 4.3 per cent year to date.
South Korean shares outperformed their peers with a 1.8 per cent jump to a one-month high, as foreigners stepped up buying and a pause in the yen's falling trend soothed sentiment.
Australian shares rose 0.3 per cent, extending their bull run at 4-1/2-year highs on improving sentiment overseas and a better-than-expected domestic earnings season. The Australian market has risen nearly 10 per cent this year.
Positive growth in Southeast Asia has drawn foreign investors, keeping regional stocks robust. The Philippines stock market extended gains to a record high while Bangkok's SET index hit a fresh 18-year high.
Rallying stocks weighed on assets perceived as safe-haven, with spot gold inching up 0.2 per cent to $1,606.84 an ounce but stuck near a six-month low.
Asian credit markets took their cues from stocks, tightening the spread on the iTraxx Asia ex-Japan investment-grade index by two basis points.
London copper edged up 0.2 per cent to $8,067.75 a tonne, off Tuesday's three-week lows.
US crude steadied around $96.72 a barrel but Brent eased 0.2 percent to $117.31. Platinum and palladium also have further upside scope due to supply concerns.
The rise in equities weighed on assets perceived as safe-haven, such US Treasuries and gold on Tuesday. Spot gold inched up 0.2 percent to $1,607.94 an ounce, but hovered near a six-month low hit the day before.
Tokyo's Nikkei stock average closed 0.8 per cent higher at its highest close since late September 2008.
The yen remained jittery, swinging in narrow ranges on concerns Japan may not be able to pursue as strong a reflationary policy mix as previously perceived.
The government delayed nominating a new Bank of Japan governor, fuelling talk of friction between the prime minister and the finance minister over who is best suited to implement the bold steps needed to reignite the economy.
The G20 meeting last weekend gave tacit approval to a weak currency as long as it was as a result of domestic monetary easing, but maintained its traditional opposition to currency manipulation aimed at fostering exports and growth of one country at others' expense.
“In light of the G20 statement to avoid competitive devaluation, it will be difficult to talk down the yen specifically. I think the onus now is on policy to do the work,” said Sim Moh Siong, FX strategist for Bank of Singapore.
The dollar fell 0.4 per cent to 93.15 yen, off its highest since May 2010 of 94.465 hit on February 11th. The euro eased 0.3 per cent to 124.91 yen. It touched a peak since April 2010 of 127.71 yen on February 6th.
Japan logged its biggest monthly trade deficit on record in January, underscoring the country's deteriorating trade balances and accenting the yen's weak fundamental trend.
Sterling was under pressure on growing speculation the UK could soon lose its prized triple-A credit rating. Sterling traded at $1.5444, having plumbed a seven-month low at $1.5414 in New York.
The euro extended its gains, rising 0.2 per cent to $1.3413.