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Asian stocks rose on Thursday amid fresh signs of resilience in the US economy, while the euro wallowed near two-year lows before a much-anticipated European Central Bank meeting that could open the door to more stimulus.
Tokyo’s Nikkei climbed 0.7 per cent, touching a new seven-year high, with sentiment buoyed by media projections suggesting a strong win for Japanese premier Shinzo Abe’s coalition at the December 14 election. A victory for Abe could lead to a new mandate for his “Abenomics’’ policies to revive the economy.
“There’s activity in anticipation of extremely promising conditions being born,’’ said Hiroyuki Nakai, chief strategist at Tokai Tokyu Research Center Co in Tokyo.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4 percent, while Australian shares were up 0.5 per cent.
Dow, S&P at record high
The improved mood was helped by the Dow and S&P rising to record highs overnight after private payrolls and services sector data underscored the US economy’s resilience.
That contrasted with the gloom in the euro zone, with a survey showing business activity grew less than expected in November and raised the spectre of another economic contraction.
Euro falls to 2-year low
The euro struggled as a result. It fetched $1.2311 after falling to a two-year low of $1.2301 overnight on the view that the ECB will be forced to inject even more stimulus to prop up the tottering euro zone economy.
While a full-blown quantitative easing programme after Thursday’s policy review is seen as unlikely, some believe the ECB may lay the groundwork for such a move early next year.
“The prospect of a sovereign bond buying programme is looking ever more likely. It probably won’t begin tonight (however, we see further corporate bond buying tonight),’’ Evan Lucas, market strategist at IG in Melbourne, wrote in a note to clients.
“The prospect will only increase sentiment towards European equities.’’
Sovereign debt purchases
Speculation that the ECB will pave the way on Thursday for sovereign debt purchases has pushed down euro zone debt yields across the board. The Italian 10-year yield fell to a record low below 2 per cent overnight.
The dollar rose to a new seven-year high of 119.910 yen after the upbeat U.S. data further highlighted the diverging monetary policy paths of the United States and Japan.
Brent, US crude
Crude oil markets remained choppy after last Thursday’s decision by OPEC not to cut supply sparked volatility and a sharp price fall.
US crude futures rose 31 cents to $67.69 a barrel after gaining the previous day on data showing a surprise tumble in US inventories. US crude has lost more than 30 per cent so far this year, touching a seven-year low of $63.72 on Monday.
Supported by the rise in US futures, Brent crude added 45 cents to $70.37 a barrel. Brent had declined on Wednesday after a report suggested Saudi Arabia expected still lower prices for oil.
Gold’s advance halted as the metal’s appeal as a hedge against inflation was tempered by the dollar’s strength. Spot gold dipped 0.2 per cent to $1,207.40 an ounce after gaining 0.9 per cent the previous day on firmer oil prices.
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