Asia surges with Japan, China stocks in lead; risk appetite lifts dollar
Asian shares surged on Wednesday following gains on Wall Street, with Japanese and Chinese stocks leading the way, while investors’ stronger appetite for riskier assets pushed up U.S. debt yields.
Spreadbetters saw Asia’s upward momentum spilling over into Europe, forecasting a higher open for Britain’s FTSE .FTSE, Germany’s DAX .GDAXI and France’s CAC .FCHI.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 1.7 percent.
Shanghai stocks .SSEC advanced 2.6 percent after President Xi Jinping made economy-friendly comments and the government unveiled proposals for a five-year financial market reform plan. [.SS]
Xinhua news agency quoted Xi as saying China can maintain annual economic growth of around 7 percent over the next five years but there were uncertainties, including weak global trade and high domestic debt.
Hong Kong’s benchmark .HSI jumped 3.0 percent.
Tokyo’s Nikkei .N225 surged 2.4 percent after three firms affiliated with Japan Post made strong trading debuts as investors rushed to get a piece of the group’s $12 billion initial public offering.
“The Japan Post IPO has performed as well as expected this morning, and on top of that we’ve seen a real sentiment boost based on the monster rally in the U.S.,” said Gavin Parry, managing director at Parry International Trading.
Large tech and energy sector gains drove U.S. stocks higher on Tuesday, with an index of 100 major Nasdaq companies finishing at a record closing high. [.N]
Investors sold safe-haven bonds as they moved into riskier assets, driving U.S. Treasury yields higher, with the benchmark 10-year note yield US10YT=RR climbing to a 1-1/2-month high of 2.225 percent overnight.
Higher U.S. debt yields supported the dollar, which gained 0.1 percent to 121.16 yen JPY=. The euro dipped 0.1 percent to $1.0952 EUR=, extending overnight losses.
Comments by European Central Bank President Mario Draghi on Tuesday that policymakers are willing and able to act if needed weighed on the common currency.
Markets remained firmly fixed on Friday’s U.S. non-farm payrolls report and whether the data will support the case for the Federal Reserve to hike interest rates in December.
Before Friday’s non-farm payrolls, the markets will have a chance to gauge the health of the U.S. economy through the ADP employment data and the ISM report on services sector sentiment due later in the session.
“We’ve seen nonfarm payrolls go in a completely different direction from ADP or ISM and we’ve also seen average hourly earnings or the unemployment rate trigger a U-turn after the initial reaction to payrolls,” wrote Kathy Lien, managing director of FX strategy at BK Asset Management.
“So traders are rightfully sceptical about whether the labour market report will confirm the Federal Reserve’s hawkish bias until the actual report is released.”
Elsewhere in currencies, the New Zealand dollar licked its wounds after sliding 1.2 percent overnight on a further decline in dairy prices and soft jobs data.
The kiwi last traded down 0.2 percent at $0.6655 NZD=D4.
Crude oil took a breather after surging overnight when U.S. gasoline and diesel rallied following an outage on a key pipeline system. The outage added support to oil markets already boosted by fears of supply disruptions in Brazil and Libya. [O/R]
U.S. crude CLc1 fell 0.4 percent to $47.73 a barrel after rallying 4 percent on Tuesday. Brent crude LCOc1 dipped 0.3 percent to $50.38 a barrel after surging 3.6 percent.
The possibility of the Fed hiking rates during the year continued to weigh on gold, with spot prices XAU= languishing near a 4-week low of $1,114.10. Higher interest rates would diminish the allure of the non-interest-paying precious metal. [GOL/]