Asia: Markets rally as ECB meeting comes into focus

[HONG KONG] Asian investors turned positive again Thursday, extending a global advance, as they turn their attention to a European Central Bank policy meeting later in the day that is expected to see another stimulus push.

But while most regional markets are in the ascendancy, Shanghai - which analysts say has been supported in the past few days by state-backed buying - was in retreat despite a strong Chinese inflation reading.

Confidence across trading floors is broadly upbeat this month after a recent rally that has seen equities, oil and high-yielding, or riskier, currencies make up some of the hefty losses suffered in January and February.

And there is hope those gains can be built upon after the ECB's policy board gathers, with market-watchers asking how, rather than if, they will loosen the monetary belt.

The meeting comes as the eurozone struggles to break out of years of weak inflation and sagging economic growth, with Bank President Mario Draghi under pressure to deliver after the last measures were criticised as half-hearted.

"There's very strong expectation that we're going to see further stimulus from the ECB, and the real question is how strong that stimulus will be," Chris Green, an Auckland-based strategist at brokerage and wealth management firm First NZ Capital Group, told Bloomberg News.

"We're seeing a more supportive environment for risk assets going forward." Among the measures being considered is a cut in interest rates further into negative territory, an increase in bond-buying - effectively printing more cash - and an extension of the current asset-purchase past its March 2017 timeframe.

Japan's Nikkei index was up one per cent by the break, Hong Kong gained 0.5 per cent, Sydney added 0.1 per cent and Seoul was 0.6 per cent higher. There were also healthy gains in Singapore, Taipei and Manila.

Wellington put on 0.6 per cent after the New Zealand central bank announced a surprise cut in interest rates to a record low, the first reduction since June. The move, while welcomed, send the local dollar plunging more than two per cent against its US counterpart.

In China, official figures showed inflation hit 2.3 per cent in February, the highest in almost two years and beating expectations of 1.8 per cent.

But while the figures will be welcomed as a much-needed positive sign after Tuesday's wretched exports data, Shanghai stocks dropped 0.9 per cent in the morning as analysts put the rise down to severe weather that sent food prices spiralling.

On oil markets, both main contracts held on to Wednesday's healthy gains after a US report showed a slower rise in stockpiles while gasoline inventories eased.

US benchmark West Texas Intermediate dipped 0.1 per cent and Brent was 0.3 per cent off. However, after sitting near 13-year lows below US$30 a barrel just weeks ago, WTI remains deep in the high US$30 region while Brent is hovering around US$41.

Prices have been supported in recent weeks by hopes that expected talks between key producers including Russia and Saudi Arabia will end with output freezes or even reductions.

AFP