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Asian markets lifted by US, Europe stimulus hopes

June 7, 2012

HONG KONG: Asian markets mostly rose for a third successive day today, posting strong gains on hopes for stimulus measures in the United States and Europe as well as promises of help for Spain’s banks.

The euro also held up against the yen and dollar after impressive gains in New York late Wednesday, with dealers feeling a little more confident European leaders can navigate the long-running crisis.

Tokyo closed 1.24%, or 106.19 points, higher at 8,639.72, while Seoul soared 2.56%, or 46.10 points, to 1,847.95, and Sydney rose 1.31%, adding 53.3 points, to 4,108.6

In the afternoon Hong Kong rose 1.23% but Shanghai fell 0.34%.

Regional investors followed the lead of their counterparts in Europe and the United States.

While a decision by the European Central Bank to keep rates on hold was disappointing, its head Mario Draghi said some governors on the policy committee had wanted a cut.

He added that Wednesday’s decision was “taken by very broad consensus” — which analysts took to mean that there could be a reduction next month.

The bank also said it would keep cash flowing to the 17-nation eurozone’s embattled banks, at least through year-end.

On Spain, French Finance Minister Pierre Moscovici yesterday said the eurozone was ready to “mobilise very rapidly” to assist if Madrid requested it, slightly easing fears in the region’s fourth largest economy.

Spain has become a huge concern for the eurozone, with Germany against providing aid to Spain to help its banks without a bailout, and other states flexible on how to help Madrid without resorting to a full rescue.

The likelihood of another round of stimulus in the United States rose again as the Fed looks to head off the effects of the European slump on the world’s number one economy.

French and Spanish bond auctions later today will provide a key test of confidence for the euro, dealers said.

Dennis Lockhart, President of the Atlanta Federal Reserve, said the central bank might need to consider more easing if economic growth there hits more road blocks, days after another poor batch of jobs growth data.

He said if domestic growth is no longer possible “further monetary actions to support the recovery will certainly need to be considered”, while the Fed rate-setting committee needs to be ready to respond to economic instability.

“The market is starting to price in additional policy response, and there is a greater expectation that something might happen before the Greek election (on June 17),” Tim Schroeders, fund manager, at Pengana Capital in Australia, told Dow Jones Newswires.

Eyes will now be on Fed chairman Ben Bernanke’s testimony on the US economic outlook later in the day for clues to the bank’s response.

Investors in Europe and New York welcomed the comments. On Wall Street the Dow surged 2.37%, the S&P 500 rose 2.30% and the Nasdaq climbed 2.40%.

In Europe, shares in London, Frankfurt, Paris and Madrid were all more than two percent higher.

Amid concerns about the impact of Europe’s crisis on the US economy President Barack Obama called British, German and Italian leaders Wednesday to press the case for an “immediate plan” to find a resolution.

“The leaders agreed on the importance of steps to strengthen the resilience of the eurozone and growth in Europe and globally,” White House spokesman Jay Carney said.

Hours later, on Thursday morning in Europe German Chancellor Angela Merkel said she wanted to work towards political union but warned that an EU summit later this month would not solve the region’s problems at once.

On currency markets the euro eased slightly in early Asian trade after making healthy gains in New York on Wednesday.

The common currency fetched US$1.2561 and 99.78 yen in Tokyo, compared with US$1.2580 and 99.63 yen in New York.

It had been sitting at US$1.2490 and 98.60 yen in Asia earlier yesterday.

The dollar was at 79.45 yen today, against 79.20 yen.

Oil was also stronger. New York’s main contract, light sweet crude for delivery in July, was up 35 US cents to US$85.37 a barrel in the afternoon and Brent North Sea crude for July delivery gained 14 US cents to US$100.78.

Gold was at US$1,621.40 an ounce at 0615 GMT, compared with US$1,635.50 late yesterday.

In other markets:

  • Taipei gained 0.34%, or 24.16 points, to 7,080.31. TSMC rose 2.57% to Tw$79.8 while Hon Hai Precision was 1.33% higher at Tw$83.9.
  • Wellington closed 0.27%, or 9.44 points, higher at 3,273.96. Auckland Airport rose 0.8% to NZ$2.53, Telecom climbed 1.01% ercent to NZ$2.50 and Contact Energy was up 0.42% at NZ$4.76, while Fletcher Building eased 0.16% to NZ$6.29.



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