Record Wall Street supports Asian shares, Yen near lows

Reuters: Wall Street’s record closing overnight and growing optimism about the Chinese economy underpinned Asian shares on Thursday while the Bank of Japan’s bold monetary stimulus kept the Yen pinned near fresh lows against major currencies. The Dow Jones industrial average and the Standard and Poor’s (S&P) 500 Index both ended at historic highs on Wednesday, led by cyclical shares after Chinese trade data signalled a recovery in domestic demand.

The Dollar also was supported after the minutes of the US Federal Reserves’ March meeting suggested Fed officials debated slowing the pace of asset purchases or end them later this year. The MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.1% in early trade.

Australian shares were up 0.2%, supported by overnight rallies in US stocks and rising iron ore prices, while South Korean shares opened 0.5% higher ahead of the Bank of Korea’s policy meeting later in the session.

“Shares are likely to resume their rebound as global market conditions are favourable,” an analyst at Hanyang Securities, of Seoul shares Lim Dong-rak said. “The KOSPI has taken a hit from the yen’s slide and the geopolitical risk, but the decoupling from global markets seems to be coming to an end.”

In Japan, the Nikkei stock average opened up 1.2% after closing at its highest since August 2008 on Wednesday.

“Aggressive easing by the Bank of Japan has been rapidly priced in by global rates markets as investors search for yield. However, global equities are only starting to price in the BOJ actions as ‘risk on’,” Barclays Capital said in a research.

“We believe this delay reflects weaker cyclical data in the US and the Euro area; the differentiation by equity investors and initial scepticism about the global implications of QE in Japan.”

The Yen remained near recent lows. The Dollar was at 99.72 Yen and the Euro traded at 130.21 Yen, while the Aussie was at 105.05 Yen.

On Wednesday, the Dollar hit a four-year high of 99.88 Yen, the Euro climbed as far as 130.57 Yen, its highest since January 2010, and the Aussie Dollar soared to 105.26 Yen, the highest since November 2007.

The Yen’s weakness has been compounded by speculation that Japanese investors will actively buy foreign bonds for higher returns as the BOJ’s aggressive reflationary policy pushed Japanese Government bond yields sharply lower. European Government bond yields in particular have been falling on such views. Mitsui Life Insurance, Japan’s fifth-largest life insurer, suggested it will keep its allocations more or less unchanged this fiscal year.

Japan’s Kokusai asset management, the manager of the country’s biggest mutual fund, said it will retain a high exposure to the United States in its US$ 15 billion bond fund, but has no plans to sharply increase its exposure to US debt.

Spot gold was down 0.2% to hover near US$ 1,550 an ounce, after falling 1.5% on Wednesday, its biggest one-day drop in 1½ months, hit by the Fed’s minutes and by Cyprus’s plan to sell its gold reserves to raise cash. The US crude futures eased 0.2% to US$ 94.43 a barrel.