Asian shares rise as markets bet on central bank support

Reuters: Asian shares rose on Friday and the euro edged higher as traders placed modest bets that central banks will unleash further monetary stimulus measures, but volumes were razor-thin amid fears that Sunday’s Greek election could trigger market turmoil.

Global markets have been volatile this week amid uncertainty about the outcome of the poll, which could set Greece on a path out of the euro zone and increase the likelihood of financial contagion engulfing other weak economies in the bloc.

European shares are expected to open higher, with financial spreadbetters calling the main indexes in London, Paris and Frankfurt up 0.5-0.7 percent.

“Despite some traders pricing in a global deluge of cheap money, today’s gains on the open are seen as only modest,” said Jonathan Sudaria, a dealer at London Capital Group.

“The uncertainties of the Greek election and the subsequent volatility are far too risky for some to stomach taking positions home over the weekend.”

MSCI’s broadest index of Asia Pacific shares outside Japan rose 0.6 percent, while Japan’s Nikkei share average was flat.

Officials from the G20 nations, whose leaders are meeting in Mexico next week, told Reuters on Thursday that central banks were ready to take steps to stabilise financial markets - if needed - by providing liquidity and preventing any credit squeeze after Sunday’s election.

“The central banks are preparing for coordinated action to provide liquidity,” said a senior G20 aide familiar with discussions among international financial diplomats.

The news boosted U.S. stocks, which closed up around 1 percent on Thursday, while the euro extended earlier gains. S&P 500 index futures were modestly higher on Friday.

Disappointing U.S. state joblessness data, which showed new benefit claims rising for the fifth time in six weeks, dragged on the dollar, which eased by 0.3 percent against a basket of major currencies on Friday.

But the numbers, combined with falling consumer prices in May, also increased expectations that the Federal Reserve will deliver another monetary boost - and that supported equities and other riskier assets on Friday.

Underlying the uncertainty, Moody’s Investors Service said on Friday it had downgraded five Dutch banks, with ING Bank (ING.AS) kept on a negative outlook meaning it could be cut again, kicking off a long-awaited round of downgrades for major European institutions.

The downgrades did not hit Asian markets however, where the hopes being pinned on support from central banks helped the euro gain 0.1 percent to around $1.2640.

Hopes of further monetary stimulus were also boosted by Britain, which announced on Thursday it would flood its banking system with cash as the euro zone’s crisis casts a “black cloud” over its economy.