Economic data lifts Asian stocks

Wed, Jan 4, 2012, 00:00

Asian stocks rose today as investor risk appetite returned after upbeat US and European economic data improved the global growth outlook, but the euro's gains were short-lived due to deep-set worries over the European debt crisis.

MSCI's broadest index of Asia Pacific shares outside Japan rose as much as 0.9 per cent to its highest in nearly a month, before trimming some gains to stand up 0.6 percent. The materials sector outperformed.

The index fell 18 per cent in 2011, sharply underperforming Wall Street's S&P 500, which ended the year virtually unchanged, and an 11 percent drop in the FTSEurofirst 300 index of top European shares.

Japan's Nikkei stock average reached a three-week high and was up 1.4 per cent, but Hong Kong and Shanghai shares lagged, with lacklustre turnover suggesting investors were cautious, refraining from chasing recent gains and taking profits.

"While we are structurally underweight risk, we suggest adopting a more neutral stance in the first two weeks of 2012," analysts at Barclays Capital said in a research note.

"We do not expect higher risk premia because risky assets have sold off to a point where they offer interesting excess returns and because it has become expensive to short risk further unless data consistently surprise on the downside."

European markets were likely to open lower, with financial spreadbetters expecting London's FTSE to start down as much as 0.3 per cent, Frankfurt's DAX down as much as 0.5 per cent and Paris' CAC-40 as much as 0.6 per cent lower.

Data released yesterday showed US manufacturing grew at its fastest pace in six months in December, while US construction rose to a near 1.5-year high in November.

Elsewhere, German unemployment fell sharply to the lowest in two decades, easing concerns that the euro zone debt crisis was putting a drag on global growth. The numbers followed earlier surveys showing Chinese manufacturing and service data topping forecasts and the euro zone's purchasing managers index contracting less than had been feared.

Asian credit markets firmed, with spreads on the iTraxx Asia ex-Japan investment grade index tightening. Positive sentiment may spur an early issuance rush as borrowers seek to take advantage of favourable conditions while they last to meet their 2012 funding needs.

The euro eased 0.1 per cent to around $1.3035 after posting its biggest one-day rally in nearly two months and reaching a one-week high of $1.3077 the previous day on upbeat data. It hit a 2011 low of $1.2856 on December 29th.

The euro also eased 0.1 per cent to below 100 yen, but off a trough of 98.71 yen hit on Monday, its lowest since late 2000.

Oil prices slipped but were still largely underpinned by supply disruption concerns as a result of growing tensions between Iran and the West.