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Asia: Stocks rise as investors mull US interest-rate outlook

Monday, October 17, 2016 - 10:04
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[SINGAPORE] Asian stocks rose for a second day as investors weighed the outlook for US interest rates amid signs the world's biggest economy is strengthening. Japanese shares advanced as the yen weakened.

The MSCI Asia Pacific Index gained 0.1 per cent to 138.25 as of 9:05am in Tokyo, after sliding the most in a month last week. Japan's Topix index rose 0.2 per cent as the yen traded at 104.11 against the US dollar. Investors are watching key economic data including those on industrial production and inflation to weigh the outlook for when the Federal Reserve will raise borrowing costs. Fed Chair Janet Yellen signalled Friday the central bank will remain deliberate in raising interest rates as the odds for monetary tightening in December hovered above 60 per cent.

"Several major global events could keep investors on the edge," said Vasu Menon, vice president for wealth management research at Oversea-Chinese Banking Corp in Singapore.

"US economic data like inflation for September and home construction, home sales and industrial output figures will be eagerly anticipated for clues about the Fed's interest rate policy."

US Debate

Investors are also bracing for the final US presidential debate set for Oct 19, as well as closely watching earnings out of the world's biggest economy.

"The final debate between Hillary Clinton and Donald Trump could lead to heightened concerns about political risk," Mr Menon said.

"Earnings are especially critical at this juncture as US stocks are trading at near-record highs and susceptible to earnings disappointments as valuations look stretched."

South Korea's Kospi index added 0.2 per cent. Australia's S&P/ASX 200 Index rose 0.1 per cent and New Zealand's S&P/NZX 50 Index was 0.8 per cent lower. Markets in China and Hong Kong have yet to start trading.

Crown Resorts Ltd, the Australian casino company controlled by billionaire James Packer, tumbled after Chinese authorities detained 18 of its employees including the head of its international high-roller operations. The stock declined as much as 13 per cent, heading for its biggest slide in almost eight years.

China Data

Futures on FTSE China A50 Index added 0.1 per cent in their most recent trading, while those on the Hang Seng Index climbed 0.3 per cent. Investors are anticipating Chinese economic data on industrial production, retail sales and gross domestic product that are all due on Wednesday after a report last week showed the nation's exports unexpectedly dropped in September.

"If China's economic growth comes in below 6.7 per cent, which was the growth rate in the first two quarters of this year, this could lead to fears that the Chinese economy is weakening once again despite stimulus," OCBC's Mr Menon said.

Futures on the Standard & Poor's index lost 0.2 per cent. The underlying US equity benchmark index closed little changed on Friday as data on retail sales and wholesale prices added to signs the world's biggest economy is strengthening, bolstering the case for the Fed to raise interest rates.

Ms Yellen said Friday at a Boston Fed conference there are "plausible ways" that running the economy hot for a while could repair some damage caused to growth during the recession, indicating a willingness to slowly tighten policy even as inflation reaches or surpasses the central banks' target.

Oil fell as US producers increased drilling while an accord between Russia and the Organization of Petroleum Exporting Countries over crude output remained in the balance ahead of a November production meeting. West Texas Intermediate crude fell 0.7 per cent in Asian trading, heading for a second day of decline.

BLOOMBERG