Asian shares push ahead on hopeful signs for global growth

Wednesday, 25 June 2014 00:00 - - {{hitsCtrl.values.hits}}

REUTERS: Asian shares ticked higher on Tuesday as improved manufacturing data from China, Japan and the United States augured well for global growth, despite a disappointing result from the euro zone. After a sluggish start the majority of markets across the region struggled ahead through the session, pushing MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.4%. Japan’s Nikkei recouped early losses to add 0.05%, while Shanghai firmed 0.2%. South Korea outperformed with a rise of 1%, led by Samsung Electronics Co Ltd. and Hyundai Motor Co. “Market heavyweights closely follow global economic recovery, and the manufacturing surveys in the US and China have provided positive signals,” said Hyundai Securities market analyst Bae Sung-young. The performance of manufacturing surveys (PMI) tend to be reliable, and timely, leading indicators of output trends and are closely watched by economists.

So there was relief that readings from the United States, China and Japan all rose strongly in the month. The US PMI was a particularly pleasant surprise as it climbed to a four-year peak of 57.5. That helped offset an unexpected dip in Markit’s euro zone PMI to 52.8 in June from May’s 53.5. David Hensley, an economist at JPMorgan, said the PMI’s taken as a whole pointed to a quickening in global industrial output, perhaps to as much as a 5% annualised pace. “Emerging Asia lies at the centre of global manufacturing, so any acceleration in global activity normally would be confirmed there,” he added. “The continued recovery in China’s manufacturing PMI is a positive sign, both outright and because China’s survey typically is aligned with the broader EM complex. The trend in official data for EM Asia ex China remains murky, however.” The data were still not enough to enliven Wall Street where the Dow ended Monday off 0.06% and the S&P 500 0.01%, while the Nasdaq added 0.01%. Financial spreadbetters expected Britain’s FTSE 100, Germany’s DAX and France’s CAC 40 to all start around a tenth of a persentage higher on Tuesday. The disappointing euro zone PMI’s restrained the euro, while the better Chinese data boosted commodity-exposed currencies including the Australian dollar. The euro was flat at $ 1.3594 while the Aussie was up at $ 0.9421 having touched a three-month peak overnight. Against the yen, the common currency stood at 138.58, while the dollar fetched 101.95. That left the dollar index a shade firmer at 80.310, though well within 80.000-81.000 range seen since May. The economic diary is bare for much of Asia on Tuesday though Japanese Prime Minister Shinzo Abe should detail more of his so-called “Third Arrow” policies including phased corporate tax cuts, public pension reforms and proposed dance hall deregulation. Given that many have already been leaked or announced by officials, the risk is that the measures are likely to receive a lukewarm response from investors. Still, the market will be keen to see how they are fleshed out and implemented. In commodity markets, gold was underpinned by geopolitical tensions amid the increasing violence in Iraq, while platinum eased as South African miners’ union declared an official end to a five-month strike. Spot gold was sitting tight at $ 1,314.60 an ounce as the market consolidated last week’s 3% jump. Brent crude edged back from nine-month highs as concerns waned that a Sunni Islamist insurgency in Iraq would cut the country’s oil exports. Brent dipped 18 cents to $ 113.94 a barrel and US crude for August delivery shed 34 cents to $ 105.83.

Gold hits 2-month high

REUTERS: Gold hit a two-month high on Tuesday and silver reached its highest since mid-March as a drop in European shares after soft German economic data and a weaker dollar helped the metal build on last week’s gains. Spot gold hit a peak of $ 1,325.70 and was up 0.5% at $ 1,323.80 an ounce at 1007 GMT, while US gold futures for August delivery were up $ 6.60 at $ 1,325. Silver was up 1.3% at $ 21.09 an ounce. Gold posted its biggest weekly rise in three months last week as the threat of escalating tensions in Iraq and the Federal Reserve’s lack of commitment to raising interest rates sparked a wave of short covering. “There are still willing buyers today as there are shorts left, and risk aversion sees fresh inflows,” VTB Capital analyst Andrey Kryuchenkov said.

Dollar bloc currencies outshine G3, Japan growth strategy eyed

REUTERS: The dollar-bloc currencies held onto gains on Tuesday, having outperformed their G3 peers on optimism about Chinese growth. Given the absence of catalysts in early Asian trading, markets looked to the Japanese government to deliver its latest instalment of long-term economic policies later in the day. The Canadian dollar traded at C$ 1.0725, not far from a 5-1/2 month peak of C$ 1.0717 per US dollar. Both the Australian and New Zealand dollars were at $ 0.9424 and $ 0.8711, having hit multi-week highs of $ 0.9445 and $ 0.8749 on Monday. All three currencies had risen after a closely watched survey on Monday showed activity in China’s factory sector expanded in June for the first time in six months as new orders surged. Gains in the Canadian dollar followed Friday’s rally sparked by upside surprises in local inflation and retail sales data. “Our proprietary positioning indicator is suggesting market has flipped to a long CAD bias for the first time since early 2013,” BNP Paribas analysts wrote in a note to clients. “Given the scope for a less dovish Bank of Canada announcement and Monetary Policy Report next month, we see scope for further CAD gains, particularly against EUR and AUD.” In contrast, the G3 currencies were stuck in familiar ranges with investors discounting the latest readings on euro zone, US and Japanese manufacturing activity given the dovish stance taken by all three major central banks. The euro was last at $ 1.3598, having traded on either side of $ 1.3600 in the past few sessions. Against the yen, the common currency stood at 138.54, while the dollar fetched 101.85. That left the dollar index little changed at 80.286, well within 80.000-81.000 seen since May. Japanese Prime Minister Shinzo Abe will on Tuesday detail his so-called “Third Arrow” policies including phased corporate tax cuts, reforms for the $ 1.26 trillion Government Pension Investment Fund (GPIF) – the world’s biggest pension fund – and proposed dance hall deregulation. Given that many have already been leaked or announced by officials, the risk is that the measures are likely to receive a lukewarm response from investors. Still, the market will be keen to see how they are fleshed out and implemented. “Much of the attention, particularly from foreign investors, is on GPIF reform,” said Shinichiro Kadota, chief Japan FX strategist at Barclays Bank in Tokyo. “But judging from what the GPIF has been implying so far, portfolio allocation details are not expected to be revealed until August or even October, so any market reaction today is likely to be limited,” he said. Abe’s government is pushing GPIF to buy more stocks and invest less in government bonds, which is expected to have repercussions on financial markets given the fund’s size. Elsewhere, the market awaited Bank of England Governor Mark Carney’s appearance at a parliamentary committee later in the session, which could be a potential driver of sterling. Of particular interest for traders is whether Carney would provide further hints of an early rate hike, after the governor suggested as much earlier in the month and set sterling on course for a near six-year peak versus the dollar. The pound traded at $ 1.7023 after reaching $ 1.7064, its highest since October 2008.