Asian shares hit one year high as dollar slips on weak US data

Asian shares hit a one-year high on Wednesday while the dollar and Treasury yields slid on weak US productivity data, while sterling inched up from a one-month low.

The Asian stocks rally is, however, unlikely to extend to Europe, with financial spreadbetter CMC Markets forecasting Germany's Dax will open down 0.1 per cent, Britain's FTSE 100 will fall 0.2 per cent and France's CAC 40 will start the day 0.4 per cent lower.

MSCI's broadest index of Asia-Pacific shares excluding Japan rose 0.3 per cent to the highest level since August 2015. Japan's Nikkei closed 0.2 per cent lower, pulled down by a stronger yen.

Taiwanese shares ended the day up 0.5 per cent and at their highest level in 13 months.

South Korean stocks advanced 0.15 per cent to a nine-month high.

Hong Kong’s Hang Seng index reversed earlier gains to trade down 0.1 per cent, after earlier hitting its highest level since November.

Australian shares missed the rally. Commonwealth Bank of Australia, the nation’s second-largest lender, reported the slowest earnings growth since 2009 and a rise in loan impairments, despite posting a seventh-straight record profit.

The Australian index ended the day down almost 0.2 per cent.

Wall Street eked out gains on Tuesday following a strong session for European stock markets, with Germany's DAX index jumping 2.5 per cent to its highest of 2016 on strong earnings from reinsurer Munich Re and telecoms group Altice.

MSCI’s world index covering 46 markets advanced 0.2 per cent, close to the level that it hit on Tuesday - the highest in almost a year.

"Following strong US payrolls data last week, we are in a sweet spot where the US economy seems to be doing okay while the chances of a near-term Fed rate hike are still relatively small," said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

“Earnings in the US, Europe and Japan are not bad. So we may be seeing something of a ‘Goldilocks’ market globally,” he added.

But data showing weak US productivity weighed on US bond yields, with the 10-year notes yield dipping to 1.5350 per cent from Monday’s two-week high of 1.616 per cent.

“Low US productivity growth could suggest the third quarter growth can’t be fantastic. That in turn would mean the Fed will not need to raise rates,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

The dollar was weak against most other currencies. It slipped 0.5 per cent to 101.395 yen, giving up most of its gains so far this week. The euro rose 0.3 per cent to $1.1150 , extending its recovery from Friday’s one-week low of $1.1046.

The dollar index, which tracks the US currency against a basket of six peers, retreated 0.4 per cent to 95.782.

Additionally, the Bank of England’s reverse bond auction failed to meet its target on Tuesday, highlighting the scarcity of investors willing to sell from a quickly dwindling pool of long-term bonds with positive yields.

The 10-year UK gilts yield was at 0.577 after hitting a record low of 0.563 per cent after the BoE fell £52 million ($68 million) short of its target to buy more than 1 billion pounds of long-dated UK government debt.

That was the first time it failed to find enough sellers since it started its quantitative easing programme in 2009.

The British central bank announced last week that it would be increasing its bond buying in addition to cutting interest rates in the latest effort to stimulate the country’s economy.

The British pound recovered 0.4 per cent to $1.3055, after hitting a one-month low of $1.2956 on Tuesday when Bank of England policymaker Ian McCafferty said the central bank will probably have to loosen monetary policy further if the UK economy worsens.

The dollar’s weakness gave gold a leg up, with the precious metal gaining 1.1 per cent to $1,354.30 an ounce.

Oil prices slipped after a surprise US crude stockpile build rekindled worries about a persistent global glut.

Brent futures fell 0.2 per cent to $44.90 per barrel, after losing 0.9 per cent on Tuesday. US crude also slipped 0.3 per cent to $42.64, extending Tuesday’s 0.6 per cent decline.