Asian shares rise to fresh two-and-a-half-month high

Tokyo — Asian shares rose to a fresh two-and-a-half-month high on Thursday, supported by sound economic fundamentals, while the expectation the European Central Bank (ECB) could start to wind down its stimulus boosted the euro and global bond yields.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.4% to extend its gains, hitting a two-and-a-half-month high for a second consecutive day. Japan’s Nikkei average rose 0.8%. Notable gainers include the technology-heavy Taiwanese stocks, with Taiwan’s main index nearing the 27-year high of 11,270 hit on January 23. The index has rallied 4.25% since last Wednesday, boosted by the rally in tech stocks and the Nasdaq.

The euro held near a two-week high while Germany’s benchmark 10-year bond hit its own two-week high of 0.486% growing conviction the European Central Bank (ECB) would announce as early as next week its intention to end a drawn-out stimulus programme by year-end.

The 10-year US treasury yield hit a fresh one-and-a-half-week peak of 2.985%. ECB chief economist Peter Praet said on Wednesday that robust growth made the central bank increasingly confident that inflation was on its way back to target, raising the chances it may use next week’s meeting next week to reveal more about the end of its bond-buying programme.

Praet’s comments sent the euro to $1.1796, its highest level since May 22, on Wednesday. The common currency last traded up 0.1% at $1.1789. The dollar index was down 0.1% to 93.525.

Concern over the effects of reduced ECB bond buying triggered a broad sell-off in German bunds and other European government debt, which spilt over to treasuries, analysts said.

Higher yields helped to lift S&P 500 financials, which rose 1.8% and were the biggest percentage gainer among S&P 500 sectors.

“The US 10 year treasury yield rose alongside its eurozone peers overnight, while US stocks rallied, reflecting a risk-on attitude among investors,” said Makoto Noji, senior forex/bond strategist at SMBC Nikko Securities.

White House economic adviser Larry Kudlow said late on Wednesday that US President Donald Trump would meet French President Emmanuel Macron and Canadian Prime Minister Justin Trudeau at the Group of Seven (G-7) summit this week.

Although Kudlow said Trump would not back down from the tough line he has taken on trade, the comments appeared to calm investors.

The Dow Jones Industrial Average rose 1.4% to 25,146.39, the S&P 500 gained 0.86% to 2,772.35 and the Nasdaq Composite added 0.67% to hit its record closing high of 7,689.24.

Oil prices rose on Thursday to shake off some of the previous session’s losses, supported by plunging exports from Opec-member Venezuela.

Brent crude futures last traded at $75.70 a barrel and US West Texas Intermediate (WTI) crude at 65.01, each rising 0.5% on the day.

Copper hit a five-month high of $7,278.50/tonne, though the gains was driven more by supply concerns in Chile than by stronger demand.

Gold prices edged higher, with spot gold last traded at $1,297/oz, up 0.1% on the day, loosely supported by a weaker dollar amid ongoing concerns about a trade war between the US and its allies.

India’s central bank raised its policy rate for the first time in more than four years on Wednesday, but surprised some economists by keeping its stance “neutral” instead of changing it to “tighten”.

Market participants, wary of event risk, are monitoring developments ahead of the G-7 summit later this week and the US-North Korea summit scheduled for next week.

Reuters