Asian stocks pulled further away from two-month lows on Tuesday, lifted by Wall Street's extended rebound from last week's steep fall, but investors remained cautious ahead of US inflation data later in the week. MSCI's broadest index of Asia-Pacific shares outside Japan was up 1 per cent after sliding to its lowest level since Dec. 11 on Friday.
Australian stocks rose 0.5 per cent and South Korea's KOSPI climbed 1 per cent. Japan's Nikkei added 1 per cent. The Shanghai Composite Index was 1.2 per cent higher, buoyed by global gains and suggestions of possible Chinese government support. An affiliate of China's securities regulator on Monday encouraged major shareholders of domestically-listed firms to increase their holdings after last week's global selloff mauled Chinese stocks.
Wall Street's three major indexes rose for the second day on Monday as investors regained some confidence after US equities had their biggest weekly drop in two years. Still, caution lingered in the broader markets following the US-led tumble in riskier assets last week and ahead of US inflation data on Wednesday. A stronger-than-expected reading on price pressures could trigger a fresh wave of selling.
“It is hard at this stage to tell if the US markets have bottomed out, considering that bets against the dollar still remain significant,” said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo. “On the other hand, attempts by investors to pull money out of the emerging markets during last week's turmoil appeared to have been unexpectedly limited, so that is an encouraging sign.”
The dollar index against a basket of six major currencies extended modest losses suffered overnight and dipped 0.1 per cent to 90.119. The index edged back from a two-week high of 90.567 scaled late last week, when it had benefited as a safe haven in the wake of the global market selloff. The greenback was steady at 108.680 yen. The euro was flat at $1.2293.
The South African rand dipped 0.5 per cent on the day to 11.97 per dollar after news that the country's ruling party African National Congress had opted to remove President Jacob Zuma as head of state. The rand had risen 2 percent over the past two days, helped by hopes that Zuma would step down, but it gave back some of those gains as the latest news was seen prolonging the political standoff.
The Australian dollar was steady at $0.7864 after rising about 0.6 per cent overnight on the back of higher commodity prices and improvement in broader risk sentiment. The dollar's pullback from two-week highs also helped commodities. A lower greenback favours non-US buyers by reducing the price of dollar-denominated commodities.
Copper prices also bounced further away from two-month lows as more stable global markets encouraged investors to return to commodities. Copper on the London Metal Exchange extended an overnight rally to trade 0.8 per cent higher at $6,885.50 per tonne.
Brent crude rose 0.7 per cent to $62.99 per barrel. Spot gold was a shade higher at $1.323.06 an ounce.