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Friday, 3 July 2015 00:00 - - {{hitsCtrl.values.hits}}
Reuters: Asian stocks advanced for a third consecutive day and the greenback advanced on Thursday helped by upbeat US economic data though weak Chinese stocks and Greece’s standoff with its creditors capped gains.
Stocks in Shanghai fell 0.9% on Thursday, taking that market’s total losses to nearly a quarter since a 12 June peak even as authorities have rolled out numerous market-friendly measures such as reduced interest rates cuts and slashed trading costs.
Shares in Shanghai and Shenzhen have lost a quarter of their market capitalisation since the rout began, according to Thomson Reuters data.
Broader investor sentiment is also expected to remain cautious in the coming weeks, thanks to growing uncertainty over whether Greece can step back from an economic abyss after its debt default to the International Monetary Fund, and doubts over its future in the euro zone.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4% in volatile trade. Tokyo’s Nikkei climbed 1.1% thanks to a weaker yen, while South Korea’s Kospi rose 0.5%.
“We are shaping up for a bumpy ride in the summer as the Greek crisis means a risk-on, risk-off approach is seen in the markets,” said Tai Hui, chief markets strategist at JP Morgan Asset Management in Hong Kong. “Investors are likely going to move towards a more conservative positioning in their portfolios.”
Greek Prime Minister Alexis Tsipras has called a referendum on Sunday that could determine his country’s future in Europe. On Wednesday, Tsipras urged Greeks to reject an international bailout deal, souring hopes of any breakthrough.
The calling of the referendum caught global investors by surprise even as underlying market volatility has picked up, suggesting that equity positions may come under pressure, according to Barclays strategists.
A popular gauge for measuring market volatility has pulled back from this week’s highs but remains at elevated levels.
While US stocks ended up overnight, shares had trimmed intraday gains as Athens refused to soften its stance on bailout terms with its creditors.
“July 5th (day of Greek referendum) is the next key date for the euro and after that July 20th, when Greece owes the European Central Bank 3.5 billion euros,” Kathy Lien, Managing Director of FX Strategy for BK Asset Management, wrote.
“If this payment is missed, the ECB will most likely pull the plug on liquidity to Greek banks, which would have a more dramatic impact than the latest default, leading to increased uncertainty for Greece, the euro and the financial markets as a whole.”
The euro came under pressure once more as hopes of a resolution retreated overnight.
The common currency’s fall was exacerbated by strong US data, which pushed Treasury yields higher and underpinned the dollar.
On Wednesday, the ADP National Employment report showed that 237,000 private-sector US jobs were created in June, handily exceeding the median expectation in among economists surveyed by Reuters for a gain of 218,000. Construction spending in May was equally strong, hitting the highest level since October 2008.
Investors are now awaiting another batch of US data from durable goods to nonfarm payrolls ahead of a holiday on Friday, in observance of the 4 July Independence Day.
