Asian shares up on hopes of US budget deal

Obama attends the plenary session of the 21st ASEAN and East Asia summits in Phnom Penh November 20, 2012. — Reuters picObama attends the plenary session of the 21st ASEAN and East Asia summits in Phnom Penh November 20, 2012. — Reuters picTOKYO, Nov 29 — Asian shares edged higher today, mirroring US and European stock rises overnight, as sentiment improved after a senior US lawmaker said he was “optimistic” on reaching a budget deal before the end of the year to avoid a fiscal crisis.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2 per cent, after easing 0.3 per cent yesterday ending a seven-day winning streak.

Japan’s Nikkei stock average opened 0.7 per cent higher. South Korean shares opened up 0.5 per cent.

Australian shares inched up 0.3 per cent, supported by banks, but big resource stocks were mixed.

US equities jumped overnight after US House of Representatives Speaker John Boehner voiced optimism that Republicans could broker a deal with the White House to avoid year-end austerity measures.

US President Barack Obama later said he hoped an agreement can be reached before Christmas to avoid a “fiscal cliff” of tax increases and spending cuts worth US$600 billion (RM1.8 trillion) due to start in the new year and aimed at shrinking the budget deficit.

“Global stocks have recently tended to focus on one issue, which is the US fiscal cliff,” said Cho Byung-hyun, an analyst at Tong Yang Securities.

Market players remain wary of a lack of specifics on how the two major political parties plan to arrive at a compromise.

But sentiment has tended to improve on positive comments, reflecting nervousness that if US lawmakers fail to strike a deal, they risk pushing the US economy into recession and dragging down global growth.

The US economy was generally on a “measured” pace of recovery in recent weeks, according to a Federal Reserve report. Hiring remained modest, said the report, but it failed to calm concerns about slow growth and high unemployment.

Other US data yesterday showed that new single-family home sales fell slightly in October and the government revised sharply lower its estimate for September sales, denting optimism over the housing market recovery.

Asia’s growth prospects remain mixed, with economies such as Indonesia and the Phlippines underpinned by healthy domestic demand and economies such as South Korea and Japan dragged down by sluggish domestic demand and falling exports.

A key South Korean manufacturing business survey showed today its index for December fell to match a more than three-year low, with companies citing economic uncertainties.

China’s economy appears to have emerged from its lows but the outlook is uncertain. The Shanghai Composite Index fell to its lowest in nearly four years as growth-sensitive sectors sank, extending losses after closing on Tuesday below 2,000 points for the first time since January 2009.

Analysts and traders have said market moves were likely to be increasingly dictated by year-end position adjustments as hedge funds close their books, limiting both the upside and the downside for most assets.

The euro was steady around US$1.2950 after peaking at US$1.3010 on Tuesday, its highest level since October 31, on news of a deal on Greece’s debt reduction plan paved the way for further aid to prevent Athens’ from an imminent default.

The dollar was up 0.1 per cent to 82.14 yen.

US crude futures rose 0.2 per cent to US$86.62 a barrel. Spot gold was up 0.2 per cent to US$1,722.11 an ounce after slumping 1.5 per cent yesterday for its biggest one-day drop in nearly a month when deflation worries related to a US fiscal crisis and debt-stricken Greece triggered a heavy bout of stop-loss orders from momentum-driven fund investors. — Reuters


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