Asian shares hit one-month peak; China trade data upbeat

Asian shares hopped to one-month highs on Thursday after Wall Street strode to another record and bonds rallied on wagers the European Central Bank would extend its asset buying campaign at a policy meeting later in the session.

Risk appetites got an added boost when China reported upbeat trade figures with exports and imports both beating forecasts. Resource imports were very strong, a major reason prices for bulk commodities have been going gangbusters recently.

The resource-heavy Australian market jumped 1.2per cent, as did MSCI’s broadest index of Asia-Pacific shares outside Japan.

South Korea climbed 1.1 per cent led by an all time-peak for heavyweight Samsung Electronics.

Japan’s Nikkei put on 0.8 per cent, brushing off a disappointing downward revision to economic growth for the third quarter.

The bullish mood outweighed news that Moody’s had changed its outlook on Italy to negative, warning it may downgrade the credit rating if the country’s deteriorating economic and debt outlook was not reversed.

The euro took the move with aplomb, edging up to $1.0776 from an early trough of $1.0750.

Markets have been surprisingly buoyant in the wake of Italy’s “No” vote last weekend, in part on hopes for continued support from the ECB which may widen the type of bonds it buys.

Also helping sentiment were reports Italy would step in to rescue troubled bank Monte dei Paschi, which lifted its shares by 9 per cent.

All of which put downward pressure on yields of European peripheral debt, with buying spilling over to German bunds and US Treasuries. Yields on 30-year Treasury debt fell by 6 basis points on Wednesday, the biggest daily decline since August.

That drop nudged the dollar down to 113.30 yen, while the dollar index dipped 0.2 per cent.

Inflation trades

Analysts also suspect the ECB may start preparing investors for an eventual tapering of its stimulus, which could underpin the euro even as the Federal Reserve prepares to raise US interest rates next week.

The prospect of higher borrowing costs has certainly not fazed Wall Street, which notched fresh records on expectations the Trump Administration will eventually deliver fiscal stimulus and deregulation.

“Investments and policies that have done well in a low-rate, low-growth world have reached their peak. Long-term winners could be supplanted in 2017,” said analysts at BofA MerrillLynch in their year ahead outlook.

“Expect inflation rather than deflation; Main Street toprevail over Wall Street; fiscal winners to beat out zero-interest winners; and real assets to triumph over financial assets.”

The Dow ended Wednesday with gains of 1.55 per cent,while the S&P 500 climbed 1.32 per cent and the Nasdaq 1.14 per cent.

In commodity markets, oil steadied after slipping on doubts that production cuts promised by OPEC and Russia would be deep enough to end a supply overhang.

Brent futures were quoted up 3 cents at $53.03,while US crude added 14 cents to stand at $49.91.

Bulk commodities, including iron ore and coking coal, held recent hefty gains as Chinese demand drove steel prices to their highest since April 2014.

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