Asia: Stocks edge higher with European futures as lira advances

[HONG KONG] Asian stocks rose with European equity index futures as positive earnings reports from some of the world's biggest companies countered concern the global economy is losing steam. Turkey's lira and the yuan strengthened, while industrial metals retreated.

The MSCI Asia Pacific Index advanced to a three-month high as gains in telecom shares offset declines among raw-materials producers. A gauge of Hong Kong shares was poised to enter a bull market as the yuan had its biggest intra-day jump in more than a month.

The Bloomberg Dollar Spot Index held near a six-week high, supported by rising odds of a US interest-rate increase. The lira climbed from near a record low before the country's president makes an announcement in the wake of a failed coup attempt. Oil held near a two-month low as copper dropped with nickel.

A three-week run that's boosted the combined worth of global shares by more than US$4.5 trillion has pushed valuations to the highest level in 11 months. Investors are assessing corporate earnings amid concern sluggish global growth will persist after the International Monetary Fund scrapped its forecast for a pickup in the pace of expansion this year.

Goldman Sachs Group Inc and Microsoft Corp on Tuesday announced quarterly profits that surpassed analysts' estimates, something achieved by 77 per cent of the S&P 500 members to have reported so far.

"The rally is losing some momentum as the reporting season heats up," said Niv Dagan, executive director at Peak Asset Management LLC in Melbourne. "We're staying cautious and taking a little bit of profit off the table. With the equity rebound stalling, we are really looking for positive momentum from the reporting season" for the next leg up in stocks, he said.

Morgan Stanley, Intel Corp and American Express Co are among US companies announcing results on Wednesday. Gauges of euro-area consumer confidence and UK unemployment are also due, and Brazil's central bank is expected to leave its benchmark interest rate unchanged at a monetary policy review.

The MSCI Asia Pacific Index gained 0.2 per cent as of 7:18 am London time, after earlier falling as much as 0.4 per cent. A measure of telecom stocks rose 0.9 per cent and a gauge of raw- materials companies declined 1 per cent. The MSCI Hong Kong Index rose 0.9 per cent and has now rebounded more than 20 per cent from a three-year low recorded in January.

BHP Billiton Ltd dropped 2.9 per cent in Sydney after the world's biggest mining company said iron-ore production fell 7 per cent from a year earlier during the last quarter. Cimic Group Ltd tumbled 19 per cent, the most in 12 years, after reporting a 31 per cent slide in first-half revenue. Nintendo Co fell 13 per cent, after more than doubling in the two weeks through Tuesday as its Pokemon Go mobile game proved an instant hit.

Futures on the Euro Stoxx 50 Index gained 0.5 per cent as companies including Electrolux AB and SAP SE reported profits that topped analysts' estimates. Contracts on the S&P 500 Index were little changed after the US gauge slipped from an all- time high in the last session.

The Dow Jones Industrial Average advanced for an eighth day, its longest rally in three years, and Microsoft rallied in after-hours trading following the release of its results.

The lira was 0.6 per cent stronger at 3.0237 per dollar, after earlier sinking as much as 0.7 per cent to 3.0623, within 0.5 per cent of the all-time low reached in September. The currency has tumbled almost 5 per cent since a failed coup attempt on Friday as authorities purged state institutions, the central bank lowered interest rates and and Moody's Investors Service said it may lower the country's credit rating to junk.

President Recep Tayyip Erdogan is due to make an announcement on Wednesday that an official said would boost social cohesion and Turkey's democratic credentials.

The Bloomberg Dollar Spot Index was little changed, after advancing 0.5 per cent in the last session as a report showed new-home construction in the US rose more than economists forecast in June.

A Citigroup gauge that tracks the degree to which American data are exceeding projections is at an 18-month high and futures put the chance of a Federal Reserve rate increase this year at 43 per cent, up from 9 per cent at the start of this month.

"The market will recalibrate on Fed rate-hike expectations to price in at least one" this year, said Charlie Lay, a foreign-exchange strategist in Singapore at Commerzbank AG. "That should support the dollar."

South Korea's won weakened 0.4 per cent versus the dollar, the biggest loss among 16 major currencies, while South Africa's rand rose 0.4 per cent.

The yuan jumped as much as 0.28 per cent to 6.6780 per dollar amid speculation China's central bank is trying to prevent the currency from weakening beyond 6.70, a threshold that was breached this week for the first time since 2010. The People's Bank of China raised its daily reference rate for its currency on Wednesday, even after the greenback strengthened overnight.

Crude oil rose 0.1 per cent to US$44.70 a barrel in New York, after sliding 2.8 per cent over the last two trading days. While government data Wednesday is forecast to show supplies fell for a ninth week, stockpiles will still be more than 100 million barrels above the five-year seasonal average.

Nickel dropped as much as 1.7 per cent in London, retreating from its highest close since October. Zinc slid from a 14-month high and copper lost 0.7 per cent.

China, the world's top producer of refined copper, released data showing it boosted output by 7.6 per cent in the first half and Barclays Plc forecast there will be a worldwide surplus of the metal every year until 2020.

US Treasuries due in a decade were little changed, yielding 1.55 per cent. Similar-maturity sovereign debt in Japan yielded minus 0.24 per cent, down one basis point from the last session.

BLOOMBERG