Asia shares rise after commodities rebound, dollar regains ground

Friday, 16 January 2015 00:00 - - {{hitsCtrl.values.hits}}

TOKYO (Reuters): Asian stocks mostly edged up on Thursday after a significant rebound in oil and copper prices brought a semblance of calm, while the dollar regained ground lost on disappointing US retail sales. Spreadbetters saw the upward momentum for risk assets being retained in Europe, forecasting Britain’s FTSE to open up by as much as 0.5% and Germany’s DAX and France’s CAC both seen starting 0.6% higher. Indian stocks rallied after the Reserve Bank of India yielded to signs of slowing inflation and delivered a surprise interest rate cut. The India NSE index rose 1.8%. Equity gains in much of the region were less spectacular as global growth worries lingered after weak US retail sales compounded concerns over an earlier plunge in copper prices. MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.1%. Hong Kong’s Hang Seng rose 0.1% and Japan’s Nikkei bounced 1.3%. Stocks in Australia, heavily dependent on exports of natural resources, lost 0.4%. South Korea’s KOSPI dropped 0.2%. “Consumers gain purchasing power when oil prices fall, but the fact that US retail sales fell in December despite cheap oil has highlighted a serious deflation risk,” said Chun Jung-hun, an analyst at Kiwoom Securities. Copper skidded to a 5-1/2-year low on Wednesday as the recent decline in oil prices amplified fears about the state of the global economy. The industrial metal is generally considered a barometer of world demand. After plunging 5.3% overnight, benchmark LME copper rose 1.3% to $ 5,622 a tonne. Wednesday’s data from the United States further capped risk appetite, with investors already feeling a chill from the World Bank’s downgrade of its 2015 and 2016 economic forecasts. US retail sales recorded their largest decline in 11 months in December as demand fell almost across the board, tempering expectations for a sharp acceleration in consumer spending in the fourth quarter. Oil prices retained a bulk of their gains after rebounding from near six-year lows overnight as traders turned away from bearish bets stoked by a global supply glut to cover expiring options. US crude was down 0.9% at $ 48.06 a barrel after surging nearly 6% overnight. The technical nature of the rebound in oil prices kept markets cautious about the outlook. “The question is whether the market sees the current decline as overdone and is now establishing a bottom or is resetting and will go again,” Evan Lucas, market strategist at IG in Melbourne, said in note to clients. “I see the latter as the most likely scenario – the oil rout is far from over and it looks to me like a dead cat bounce.” In currencies, the dollar nursed losses after the weaker-than-expected US retail sales data pulled US Treasury yields sharply lower on Wednesday. The dollar crawled up 0.3% to 117.72 yen after going as low as 116.06 overnight, its lowest in a month. Giving the dollar a bit of respite, the benchmark 10-year Treasury yield was at 1.8758% after touching a 20-month trough of 1.7840%. The disappointing US data led the market to push further out the day when the Federal Reserve is likely to deliver its first interest rate increase, which many analysts had suspected could come in June. The euro fetched $ 1.1775, limping away from a nine-year low of $ 1.1728.

World stocks tumble as Swiss let franc soar

Reuters: Global markets were thrown into turmoil on Thursday as a shock move by Switzerland to abandon its three-year cap on the franc sent the currency soaring and Europe’s shares and bond yields tumbling. The franc jumped by almost 30% in a chaotic few minutes that saw it break past parity against the euro to trade as high as 0.8052 francs per euro as it cast off the 1.20 per euro cap it has had in place since late 2011 The move shattered what up until then had been a rebound in risk appetite following an overnight recovery in commodity prices. The pan-European FTSEurofirst 300 plunged over 2%, led by a 5% slump in Switzerland, while German government bond yields hit record lows and the yen and gold rose as investors scrambled to safety. “This is extremely violent and totally unexpected, the central bank didn’t prepare the market for it,” said Alexandre Baradez, chief market analyst at IG in France. “It’s sparking panic across all asset classes. It suddenly revives the risk of central bank policy mistakes, right when central bank action is what’s keeping equity markets going.” The view was that the Swiss central bank felt it could no longer hold out against the tide of money that is coming its way as the ECB in Frankfurt prepares to start quantitative easing and investors pour out of riskier markets like Russia. Oil has also resumed its slide despite a bounce by copper and other metals putting gold and the yen back in favour.