Asian shares rise on growth optimism, yen slides

Reuters: Asian shares rose on Friday amid an improving outlook for global economies and reduced anxiety over the euro zone’s debt problems, while the yen slid on renewed expectations for aggressive monetary easing in Japan.

Global markets rallied after China posted unexpectedly strong December trade data on Thursday, buoying hopes demand from the world’s second-largest economy will rise.

“The trade data from China showed a balanced growth in both imports and exports, raising investor confidence and lifting risk assets,” said Park Sung-hoon, an analyst at Woori Investment and Securities in Seoul.

World stock prices rose to an eight-month high on Thursday and oil prices climbed, with an encouraging view on the US economy from a top Federal Reserve official driving the Standard & Poor’s 500 index to its highest closing level in five years.

St. Louis Fed President James Bullard, a voting member this year on the Fed’s monetary policy panel, said he expects US economic growth of 3.2% for this year and for 2014, and unemployment to drop over the next two years.

MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.2 per cent, nearing its highest level since August 2011 hit last week.

Australian shares were little moved, while South Korean shares opened up 0.5 per cent.

Reflecting growing confidence in equities markets, EPFR Global noted that equity mutual funds have brought in $6.8 billion of inflows over the last four business days, with equity flows exceeding bond flows.

Japan’s benchmark Nikkei stock average opened up 1.3%as the yen accelerated its declines against the dollar and the euro.

“Short-term players who had earlier taken profits are now re-entering. A rise above 90 is within sight now,” said a trader at a Japanese bank.

The dollar jumped to 89.35 yen, its highest since June 2010, on strengthening speculation the new government under Prime Minister Shinzo Abe will exert strong pressure on the Bank of Japan to take much bolder measures to defeat deflation and stimulate the Japanese economy. The euro surged to 118.58 yen, its highest since May 2011.

The yen’s latest slide came after Abe said in an interview with the Nikkei newspaper published on Friday that the BOJ should consider maximising employment as a monetary policy goal to help boost the economy.

The yen selling also gained momentum after data showed on Friday Japan logged a current account deficit in November for the first time in 10 months, as exports fell due to weak global demand and energy imports increased. The deficit stood at 222.4 billion yen, overshooting a 3.5 billion yen deficit forecast.

“A weak yen is generally positive for Japanese exporters, but a steep drop from the current level may make them cautious,” said Yutaka Miura, a Senior Technical Analyst at Mizuho Securities, adding that investors may not take a large bet before the long weekend. Japanese financial markets will be closed on Monday for a public holiday.

The European Central Bank on Thursday kept interest rates steady at 0.75%as expected, but its president Mario Draghi’s comments offered a cautiously optimistic view.

The euro extended its gains on Friday to a one-week high of $1.3280.

Draghi said the decision to keep policy on hold was unanimous because some indicators had begun to stabilise, “albeit at low levels”, while financial market confidence had improved significantly.

Spain tapped markets on Thursday for its first bond sale of 2013, raising more money than expected at a lower borrowing cost than in a previous auction. Benchmark 10-year Spanish government bond yields fell to a 10-month low of 4.90 per cent. Spain had raised investor concerns about its ability to manage huge public debts as yields soared, fuelling speculation Madrid would seek an international bail-out.

Shrinking yield spreads between Spain and Germany hinted at a higher euro.

“The currency (euro) appears to be slightly undervalued vis-à-vis EZ sovereign spreads,” said Richard Franulovich, senior currency strategist at Westpac Securities in New York. “Current sovereign spreads suggest EUR/USD should be nearer $1.35,” he said, noting that the Spanish-German two-year spread was now at 199 basis points, its lowest levels since March 2012.

US crude futures were up 0.2%to $94.03 a barrel.

Spot gold eased 0.2%to $1,671.95 an ounce, after rising 1% overnight for its biggest one-day gain this year, as signs that the ECB will not cut interest rates any time soon boosted bullion buying.