Asia: Stocks extend global rally on US data, China stimulus

[TOKYO] Asian stocks extended a global rally on Wednesday, with Tokyo surging more than four percent as upbeat US economic data and China's fresh stimulus lifted the mood on trading floors, defying a dip in oil prices.

Better-than-expected reports on the sluggish US manufacturing sector, construction spending and auto sales showed the world's top economy was still resilient even as global growth sputters.

The upbeat figures also put the chances of another Federal Reserve rate rise this year back into play.

Buoyed by a sharply weaker yen, Tokyo's Nikkei 225 index soared 4.04 per cent by the lunch break on Wednesday.

Hong Kong added 2.7 per cent, Shanghai jumped 2.3 per cent and Seoul rose 1.60 per cent. Sydney was up 2.3 per cent.

Australian shares got a boost as official figures showed the economy grew more than expected in the fourth quarter, hinting that the resource-dependent economy is on a recovery track.

"Bets on a US recession or the Fed having to reverse course on rate hikes are quickly coming out of the market," said Angus Nicholson, a market analyst at IG in Melbourne.

"We have seen an immense risk-on rally over the past 24 hours of trade, and a lot of this does look to be underpinned by the stability that oil has found above the US$30 level over the past two weeks." Market sentiment got a boost as the People's Bank of China announced late Monday it was cutting its reserve requirement for banks.

The move is aimed at encouraging lending and stimulating activity in the world's number-two economy, which is a key driver of global growth.

The upbeat US figures helped draw investors out of the yen, which is seen as a safe bet in times of turmoil and is watched as a sign of investor confidence.

"We are getting a bit of stability in markets," Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors, told Bloomberg News.

"Most of the yen strength is behind us and most of the panic is behind us. People are underestimating just how much ammunition central banks have. US growth is slow but steady," In Europe on Tuesday, Frankfurt rose strongly as investors weighed the possibility of more stimulus from the European Central Bank, while Paris and London were also up by the close.

On oil markets on Wednesday, crude for April delivery was down 34 cents to US$34.06 a barrel and Brent slipped seven cents to US$36.74.

In currency markets, the dollar edged down to 113.86 yen from 113.94 yen in New York late Tuesday, but it was well up from 112.72 earlier this week.

AFP