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A holiday lull settled over Asian markets on Tuesday after Wall Street closed at historic highs, while oil prices suffered a stinging setback after Saudi Arabia quashed all thought of curbing supply.
A revival in risk appetite undermined the safe haven yen and kept the US dollar elevated across the board, while sovereign bonds were content to sit on recent gains.
Equity investors chose to focus on the benefits that falling fuel prices would have for consumer spending power.
“Overall, we see this as a shot in the arm for the global economy,’’ Olivier Blanchard, chief economist at the IMF, and Rabah Arezki, head of the commodities research team, wrote in their blog on Monday.
They estimated the boost to world growth would be between 0.3 and 0.7 percentage points above the Fund’s baseline forecast of 3.8 per cent in 2015, with the gain to China ranging from 0.4 to 0.7 percentage points.
Trading was light in Asia with Japanese markets shut for a holiday. Australian stocks ran into profit-taking after three sessions of sharp gains and dipped 0.5 per cent.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.2 per cent, though markets in Singapore and Taiwan both inched ahead.
On Wall Street, the S&P 500 had put on 0.38 per cent to score an all-time closing high on Monday, while the Dow added 0.87 percent and the Nasdaq 0.34 per cent.
ECB bond-buying
Europe’s broad FTSEurofirst 300 index had added 0.44 per cent encouraged in part by further evidence that the European Central Bank was set to buy euro government bonds.
Expectations the ECB will act as soon as January saw the euro touch a 2-1/2 year trough at $1.2215 on Monday and it was last trading at $1.2227.
Fed rate hike
In contrast, the Federal Reserve remains on track to hike rates at some point in 2015 which has widened the premium offered by two-year US debt to 75 basis points over German bunds, the fattest margin since early 2007.
The attraction of US yields lifted the dollar to 120.10 yen, leaving last week’s 115.56 low as a distant memory. The dollar index reached its highest since April 2006.
The steady climb in the dollar made life miserable for gold buffs as the precious metal slipped almost $20 to $1,177.14.
Crude oil
Oil bulls also suffered a cruel blow when Saudi Arabia's powerful oil minister said OPEC would not cut production at any price. Ali al-Naimi said the Saudis might instead boost output to grow the market share and that oil “may not’’ trade at $100 again.
US crude edged up 40 cents to $55.66, but that followed a loss of $1.75 on Monday. Brent stood at $60.25 having recouped just 14 cents of Monday’s $1.25 fall.
There is little in the way of Asian data due on Tuesday but a full US calendar includes November durable goods orders, final third-quarter GDP, home prices and inflation.
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