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Asia markets rise on hopes for central bank action

July 3, 2012

HONG KONG: Asian markets mostly rose today and the euro firmed on hopes that central banks in the United States and Europe would take action to boost their sluggish economies after a stream of negative data.

Regional bourses shrugged off a lacklustre performance on Wall Street, as investors hoped the Federal Reserve would take stimulus measures after weak US manufacturing data, and that the ECB would cut rates at a meeting on Thursday.

Tokyo closed up 0.70%, or 63.11 points, at 9,066.59, and Seoul ended 0.87%, or 16.17 points, higher at 1,867.82.

Hong Kong was up 1.24% in afternoon trade, while Shanghai put on 0.13%.

Sydney finished down 0.14%, or 5.80 points, at 4,127.2, although analysts said a central bank decision to keep interest rates on hold at 3.50% after two recent cuts had little effect on the market.

The euro edged up against the dollar and yen, as investors turned their attention to the European Central Bank meeting after eurozone data raised hopes of a cut in the main interest rate from the current record low of 1.0%.

On Monday in the United States, data from the Institute for Supply Management showed manufacturing contracted for the first time in almost three years in June, with its index falling to 49.7%, from May’s 53.5%.

But US stocks finished mixed as hopes rose that the latest weak economic report from the world’s biggest economy might spur the Fed into a third round of monetary stimulus, known as quantitative easing.

The Dow Jones Industrial Average fell 8.70 points, or 0.07%, to finish at 12,871.39.

The S&P 500 index advanced 3.35 points, or 0.25%, to 1,365.51, while the tech-rich Nasdaq outperformed, gaining 16.18 points, or 0.55%, to 2,951.23.

Investors were also looking ahead to Friday, when the US government releases its highly anticipated June job growth and unemployment numbers.

In Europe, data showed unemployment across the 17-nation eurozone at a euro-era high of 11.1% while manufacturing purchasing managers indices continued to show activity contracting, though some PMIs exceeded expectations.

The ECB “may have little choice but to implement a range of policy tools to shore up the ailing economy as the region faces a growing threat of a prolonged recession”, David Song, Currency Analyst at DailyFX, told Dow Jones Newswires.

World stock markets and the euro leapt last week after European leaders agreed to use emergency funds to support ailing banks directly and to ease pressure on governments’ debt burdens through bond purchases, if necessary.

They also agreed to contribute US$150 billion to boost growth.

On currency markets, the euro was at US$1.2600 and 100.55 yen in Tokyo afternoon trade, modestly higher than US$1.2582 and 100.05 yen in New York late yesterday.

The dollar edged up to 79.80 yen in thin trade, from 79.50 yen.

Oil prices rebounded in afternoon Asian trade on bargain hunting after an earlier fall sparked by slumping manufacturing output in the world’s major economies, analysts said.

New York’s main contract, light sweet crude for August delivery, advanced 82 US cents to US$84.57 a barrel and Brent North Sea crude for delivery in August was 96 US cents higher at US$98.30.

Gold rose to US$1,610.10 an ounce at 0700 GMT, compared with US$1,590.52 an ounce late yesterday.

In other markets:

Taipei rose 1.0%, or 73.2 points, to 7,418.36. Hon Hai Precision rose 1.69% to Tw$90.5 while Chunghwa Telecom was 0.85% higher at Tw$94.7.

Wellington was up 0.13%, or 4.47 points, to 3,444.63. Fletcher Building was up 2.3% at NZ$6.20, Air New Zealand rose 1.7% to NZ$0.895 and Telecom Corp was off 0.8% at NZ$2.43.



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