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Asia: Stocks extend global surge on policy outlook as won jumps

Tuesday, October 6, 2015 - 09:15
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[TOKYO] Asian stocks continued where the US left off, heading for their longest run of gains since April as the prospect global central bank policy will remain accommodative for longer bolsters equities around the world.

The regional stock benchmark followed the Standard & Poor's 500 Index in rising a fifth day, as global shares solidify their rebound from their worst quarter since 2011. The dollar maintained losses against major peers, while sliding versus Korea's won amid mounting speculation the Federal Reserve will hold off on raising interest rates until 2016. US oil held above US$46 a barrel.

"Markets continue to believe that weak data will pressure central banks in Europe and Japan to provide more stimulus and will delay the US Fed in its pursuit to begin withdrawing monetary stimulus," Matthew Sherwood, head of investment strategy at Perpetual Ltd in Sydney, which manages about US$21 billion, said in an e-mail to clients. This "continues to have investors believe that asset prices can defy the weak growth environment." Stocks have been rallying since capping their most volatile quarter in four years, as stagnation in the US labour market pushes out the probable timeline for rate increases. Odds the Fed will pull the trigger on tightening this month have fallen to 10 percent, suppressing the dollar while bolstering assets in riskier markets that have benefited from the era of cheaper money. Australia is expected to keep rates at a record-low Tuesday, while the Bank of Japan starts a two-day meeting, with almost half of economists surveyed projecting they'll bolster stimulus at the end of October.

The MSCI Asia Pacific Index climbed 0.9 per cent by 9:55 am in Tokyo, while a similar measure for global stocks added 0.1 per cent in early trade, also rising a fifth day.

Japan's Topix index headed for its longest rally since the start of August, increasing 1.5 per cent in a fifth day of gains as agriculture and fishing shares drove the advance. The smaller Nikkei 225 Stock Average climbed 1.6 per cent.

The Trans-Pacific Partnership trade deal brokered between the US and a dozen Pacific-rim nations, including Japan, may bolster stocks, said Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co in Tokyo.

The agreement, clinched Monday in Atlanta, "has a lot of potential to become a big deal for the US and Japan," Mr Matsuno said by phone. "Concerns over the global economy had become ingrained in the market's mindset. It's possible that the TPP has triggered some regret over having sold too much." In Australia, where markets didn't settle Monday, the S&P/ASX 200 Index jumped 0.9 per cent, while New Zealand's S&P/NZX 50 Index climbed 0.8 per cent in a third day of gains. South Korea's Kospi index was up by 0.5 per cent.

S&P 500 Index futures fell 0.2 per cent to 1,971.75 following a 1.8 per cent surge in the US benchmark Monday. The five-day rally is the longest for the S&P 500 since December last year and amounts to 5.6 per cent since Sept 29. Industrial companies and energy stocks drove last session's climb as crude oil rallied.

Futures on Hong Kong's Hang Seng Index increased 1.2 per cent in recent trading, rising with contracts on the Hang Seng China Enterprises Index, a gauge of mainland equities listed in the city. Mainland Chinese markets remain closed through Wednesday for the week-long National Day holidays.

As well as the Australian rate review, the Philippines issues an update on consumer prices Tuesday and a gauge of India's services industries is due.

The Bloomberg Dollar Spot Index, a gauge of the US currency against 10 major peers, was little changed Tuesday after falling 0.1 per cent last session in a third day of losses. Weaker-than-expected American payrolls data last Friday damped the outlook for the first rate increase since 2006, with traders pushing out bets on a hike to March next year.

The won strengthened a second day, adding 0.5 per cent to 1,165.97 per dollar, as non-deliverable forwards on the Indonesian rupiah climbed 0.2 per cent.

"The way the market is looking at the payrolls numbers is weak enough to diminish the case for higher US rates, but not weak enough to point to a materially weaker economy," said Adam Cole, London-based head of global foreign-exchange strategy at Royal Bank of Canada. "They're positive for risk appetite." The yen, regarded as a haven investment along with government bonds, was steady at 120.47 per dollar after sinking 0.5 per cent on Monday.

The Aussie was little changed at 70.80 US cents following Monday's surge of as much as 0.9 per cent to 71.11 cents, the highest level since Sept 22. The Reserve Bank of Australia will keep rates at 2 per cent Tuesday, according to all 27 economists surveyed by Bloomberg. New Zealand's dollar also held onto gains from last session.

Treasuries came back a bit from Monday's losses, with 10- year yields dropping one basis point, or 0.01 percentage point, to 2.05 per cent. Rates jumped six basis points last session.

Yields on Australian government debt due in a decade tracked Monday's US moves, climbing five basis points to 2.60 per cent, while Japanese rates added one basis point to 0.33 per cent.

West Texas Intermediate crude was little changed at US$46.29 a barrel after adding 1.6 per cent on Monday. The gains were fueled by data showing the number of active rigs in the US slumped to a five-year low, a sign oil production may be slowing amid the global glut. Brent rose 0.3 per cent to US$49.38.

Copper for three-month delivery was steady at US$5,179 a metric ton, following Monday's 1.5 per cent climb, while gold for immediate delivery was little changed at US$1,136.69 an ounce after retreating 0.3 per cent.

The Bloomberg Commodity Index rose 1 per cent Monday, extending its 0.9 per cent advance from Friday as the weaker dollar buoyed raw-material prices.

BLOOMBERG