Monday 22 January 2018

Asian stocks edge up to four-month high, dollar sags on Fed caution

Lack of performance a global issue for investors in actively-managed equity funds. Photo: Bloomberg
Lack of performance a global issue for investors in actively-managed equity funds. Photo: Bloomberg

Asian shares edged up to a four-month high on Thursday as receding worries of near-term US interest rate hikes continued to buoy investors' appetite for riskier assets.

But spreadbetters forecast a slightly lower open for Britain's FTSE, Germany's DAX and France's CAC, with sliding crude oil prices expected to prevent European stocks from extending the previous day's rally.

The dollar hovered near seven-week lows versus the euro, still gripped by cautious comments from Federal Reserve Chair Janet Yellen earlier in the week on monetary tightening.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.1pc, briefly reaching its highest since early December.

The index was poised to eke out a gain of 1pc this quarter, which saw equities rocked earlier by global growth worries, and particularly for the Chinese economy.

Japan's Nikkei rose 0.2pc, on track for an 11pc loss on the quarter as the yen firmed against the flagging dollar, while Australian stocks added 1.5pc.

Shanghai shares climbed 0.5pc, en route to a quarterly drop of about 15pc.

Risk appetite has increased since Fed Chair Yellen said on Tuesday that the U.S. central bank should proceed cautiously as it looks to hike rates, pushing back against some colleagues who have suggested another move may be just around the corner.

"Fed Chair Janet Yellen's speech earlier this week is still dragging the dollar down, sparking risk appetite globally," said Kim Moon-il, a foreign exchange analyst at Eugene Futures in Seoul.

Yellen's views were echoed by Chicago Fed President Charles Evans, who said on Wednesday there was a high hurdle to raising rates in April, given low inflation.

Following such cautious views from top Fed officials, the Dow climbed 0.5pc and the S&P 500 rose 0.4pc overnight.

The CBOE Market Volatility Index, Wall Street's "fear gauge", ended down 1.9pc at its lowest level since August.

"Global markets are likely to be dominated by month- and quarter-end flows today as markets await tomorrow's U.S. Institute of Supply Management data, non-farm payrolls and global purchasing managers' indexes, particularly that of China," wrote strategists at ANZ.

In currencies, the euro fetched $1.1315, not far from Wednesday's seven-week peak of $1.1365. The common currency was set for a 4pc quarterly rise.

The dollar dipped 0.1pc to 112.355 yen, headed for 6.6pc drop this quarter that saw the safe-haven Japanese currency benefit during bouts of global risk aversion.

The greenback's recent weakness has been a boon to the Australian and New Zealand dollars, which both soared to nine-month highs.

Crude oil prices dipped after US government data showed crude inventories were again at all-time peaks despite strong refinery runs. U.S. crude CLc1 was down 1.4pc at $37.78 a barrel and Brent LCOc1 lost 1.2pc to $38.81.

Oil prices, which fell to 12-year lows earlier this year, have risen about 50pc since mid-February after major producers floated the idea of freezing production at January's highs. Some analysts say the rally has breached fundamentals and crude could trade lower.

Copper slid as concerns over slowing Chinese demand mounted ahead of Friday's China official purchasing managers' index release. Three-month copper on the London Metal Exchange CMCU3 slid to as low as $4,829.50 per tonne, the lowest since March 3.


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