HONG KONG, June 19 — Asian stocks snapped a four-day slide today and government bond yields climbed after upbeat US factory and jobs data provided more evidence that the global economy is recovering from its deep recession.
A slowing pace of contraction in the Philadelphia Federal Reserve’s regional gauge of manufacturing and a rise in the expectations index to its highest since September 2003 – when the US economy was healing from its last recession – comforted investors.
The rise in Asian equity markets mirrored that on Wall Street the previous day, lifting higher-yielding currencies even as many market players turned cautious towards the end of the second quarter.
Analysts said that while the latest economic news out of the United States was a clear positive, the road to recovery was likely to be a long slog.
“US economic data is pointing to an end to the US recession. Good news? Absolutely. But unfortunately the end of recession does not mean the end of pain,” said Patrick Bennett, Asia FX and interest rate strategist at Societe Generale in Hong Kong.
Japan’s Nikkei average clung to gains of 0.9 per cent but posted its worst week since early March as investors raced to take profits a week after the index posted a eight-month closing high above 10,000.
The April-June quarter has been a bumper one for portfolio managers on mounting signs the worst of the recession had passed, with Asian stocks outside Japan up nearly 30 per cent so far and poised for their biggest quarterly gain in 16 years.
The MSCI index of Asia-Pacific shares outside Japan edged up about 0.9 per cent but was down more than 5 per cent on the week, the biggest such drop since late February – just before the stock market’s rally began in March.
Since the lows hit in early March, the MSCI benchmark of Asian shares has soared nearly 56 per cent.
Shanghai climbed 0.9 per cent to their highest close in nearly 11 months but lagged gains in most other Asian markets as the first initial public offering since September came to the market, the start of an expected wave of issues.
India rose nearly 2 per cent while Singapore rose 1.6 per cent. Taiwan gained 1.4 per cent while Korea added 0.6 per cent and Australia made modest gains of 0.2 per cent.
Investors are keeping an eye out for sharp market moves towards the end of the quarter, with the hefty gains for riskier assets likely spurring profit-taking as hedge funds and asset managers close their books.
Later on Friday, June US stock futures and options will expire, and many positions will be rolled into September contracts – another potential spark for sudden moves.
Futures on the US S&P 500 were up 0.6 per cent in Asia after the index rose nearly 1 per cent yesterday.
BONDS HIT BUT DOLLAR DRIFTS
Asian bond markets proved resilient to the drop in US Treasuries the previous day on the surprisingly good economic figures.
US bond dealers were also spooked after the Treasury said it would sell a record US$104 billion (RM364 billion) of debt next week, the latest massive auction to fund stimulus spending.
Ten-year Japanese government bonds reversed early losses, with yields dipping half a basis point to 1.445 per cent.
Treasuries extended losses in Asia, yielding up 2 basis points to 3.84 per cent on top of the 12-basis point spike yesterday.
Currencies were little changed in choppy trade.
The dollar index, a gauge of its performance against six major currencies, was largely steady in Asian trade and holding small gains on the week after recovering from a seven-month low struck earlier in the month.
Oil rose towards US$72 a barrel, extending its gains of a day earlier on bullish US economic data and supply concerns in OPEC member Nigeria.
Gold fell to around US$934 an ounce after edging up towards US$935 as it remained vulnerable to a firm dollar which prevents the precious metal from showcasing its merits as an alternative investment to the US currency. – Reuters
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