Asian shares scale fresh 4-month highs

Asian stocks rose to their highest levels in more than four months on Thursday and regional currencies weakened led by the Singapore dollar as hopes grew that more central banks will join the city state in easing monetary policy in the coming months.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 per cent, reaching its highest level since November 26. It has risen 5 per cent since Friday, breaking above several resistance levels to signal further gains.

European shares were seen opening flat on Thursday, with bullish sentiment expected to keep European equities near their highest level in a month.

Singapore’s central bank on Thursday surprised markets by setting the rate of appreciation of the Singapore dollar policy band at zero per cent after data previously showed economic growth stalled in the first quarter.

"It's very interesting, and eye-catching, that the MAS has gone back to post-global financial crisis settings, and sends a strong message about the weak external environment," said Sean Callow, senior currency strategist at Westpac in Sydney.

“As one of the world’s most trade-sensitive economies, Singapore’s concern over a ‘less favourable external environment’ should be noted by the likes” of South Korea, Australia and New Zealand, Callow said.

Notwithstanding the optimistic trade data out of China on Wednesday, Singapore’s policy decision is yet another reminder of the headwinds facing the global economy.

Earlier this week, the IMF cut its global growth forecast for the fourth time in the past year, citing a bunch of factors including chronic weakness in advanced economies.

Stock markets across the region were a sea of green led by Japan and Hong Kong as investors interpreted this as sign of more policy easing by the trade-dependent economies of South East Asia and a shallower trajectory of interest rate increases by the US Federal Reserve in the coming months.

Overnight on Wall Street, the S&P 500 Index gained 1 percent to a four-month high after JPMorgan Chase’s first quarter earnings fell less than expected, helping to lift the S&P 500 financial sector 2.2 per cent. Stock index futures suggested a flat opening.

In the currency markets, rising risk appetite and the hunger for yield spurred the dollar to turn the tables on the lower-yielding euro and yen.

The euro extended its weakness in Asian hours after falling 1 per cent on Wednesday, its biggest fall in 5 months. In afternoon trades, it was changing hands at $1.12550, 0.1 per cent weaker than Wednesday and off Tuesday’s six-month high of $1.1465.

The dollar bounced back against the yen to 109.37, extending the recovery from its 17-month low of 107.63 touched on Monday despite softer-than-expected US producer prices and retail sales numbers last month.

“The dollar/yen might not go much higher for now,” said Kaneo Ogino, director at foreign exchange research firm Global-info in Tokyo, citing strong resistance at 110 yen.

In Asia, the Singapore dollar weakened 1 per cent after the city state’s central bank eased its policy, triggering a downdraft in other Asian currencies. The Korean won fell more than one percent against the greenback in early deals.

Oil prices fell on Thursday as OPEC warned of slowing demand and Russia hinted that there would only be a loose agreement with little commitments at the upcoming exporter meeting to rein in ballooning oversupply.

Brent crude futures fell 1.5 per cent in Asian trade on Thursday to $43.53 per barrel after having scaled a high of $44.94 on Wednesday.

Reuters