Asia shares firm as traders add to ECB stimulus bets

Reuters: Asian shares held firm and US stock futures edged higher in early trade on Friday as expectations of additional stimulus from the European Central Bank underpinned appetite for riskier assets, while the euro hovered near seven-month lows.

Benchmark share indexes in Japan, South Korea and Australia was almost flat due to the dollar’s strength.

US stock futures rose 0.4% to their highest level since 9 November after a market holiday on Thursday for Thanksgiving Day.

Although the US holiday thinned global financial trade, the pan-European FTSEurofirst 300 index gained 0.9% on Thursday to end at three-month high, led by German shares.

The European Central Bank meets next Thursday and most in the market expect it to expand its asset purchase program and lower its deposit rate, the rate at which banks park excess funds with it.

Traders are now speculating that the ECB could cut rates more than the previous market consensus of a 0.10%age point cut.

The euro’s three-month overnight indexed swap (OIS) rate fell to a new low around minus 0.28%, more than 0.15% below the current fixing level of the Overnight Eonia rate.

With keeping money in the euro seen increasingly costly because of negative interest rates, the common currency was on the defensive in the foreign exchange market.

The euro traded at $ 1.0606, not far from Wednesday’s seven-month low of $ 1.0565. It also stood near a seven-month low against the yen, last fetching 130.07 yen.

“You keep losing money by holding the euro. It is hard to see the euro rising. True, it is already heavily shorted but I expect the euro to fall towards parity with the dollar,” said a trader at a Japanese bank.

The yen was little changed against the dollar at 122.63 per dollar, showing no response to a series of Japanese economic data including jobless rate, which unexpectedly fell to a two-decade low of 3.1%.

Oil prices edged lower, with US stockpile data published on Wednesday doing little to ease concerns about a supply glut.

US crude futures fell 1.1% to $ 42.57 a barrel as traders also unwound some of buying they had made after Turkey had shot down a Russian warplane earlier this week.

Brent futures edged down to $ 45.62 a barrel on Thursday, compared to their two-week high of $ 46.50 hit earlier this week.

Battered metal prices also rebounded as hedge funds covered their short positions for now.

Benchmark copper on the London Metal Exchange rose 1.9% on Thursday to $ 4,636.15 per tonne, recovering 4.3% from Monday’s 6 1/2-year low of $ 4,443.50.

Zinc and Nickel also jumped sharply on Thursday, helped by expectations of output cuts in China.