Sydney: Asian stocks neared 22-month highs on Wednesday as regional investors largely shrugged off festering worries about fiscal problems in Europe and focused on a recovery in the world economy.
The upbeat mood about global growth was also reflected in commodity markets, with copper prices hovering near 20-month highs and oil prices near 18-month peaks.
While worries about Greece’s ability to cut its mountain of debt continued to weigh on the euro, those concerns scarcely caused a ripple in Asian markets, with some investors citing profit-taking as the biggest near-term threat to the regional rally in stocks, bonds and currencies.
“Both domestic and US economic fundamentals have been showing signs of improvement, and sentiment is solid,” said Kim Yong-kyun, a market analyst at Daishin Securities in Seoul.
“Appetite to redeem funds is ripe at the index’s current level. But after a brief redemption spree the market will be ready for a further gradual upward run,” Kim said.
The S&P and the Nasdaq saw modest gains overnight, while the Dow slipped 0.3% but continued to eye the psychologically important 11,000-point level.
The MSCI’s broad measure of shares in the Asia-Pacific outside Japan rose 0.8% on Wednesday, nearing levels last seen in June 2008.
It has gained nearly 5% so far this year and an impressive 73% since the end of 2008, more than double the 30% jump in the US S&P 500 over the same period as Asia rebounds from the global crisis far faster than major Western economies.
But the Asia ex-Japan index looks increasingly ripe for a pullback, with the 14-day relative strength index reading 83, well above the 70 mark which points to a market being overbought.
Hong Kong shares were the strongest risers, with the Hang Seng Index up 1.3% as traders returned from a five-day holiday weekend and caught up to gains elsewhere in the world that have been fueled by upbeat US economic data.
Japan’s Nikkei was up 0.4% as the Bank of Japan concluded its policy meeting by keeping interest rates steady at 0.1%, as expected.
Copper was strong under $8,000 a tonne after touching a 20-month high of $8,010 the previous day.
If copper is indeed a barometer of industrial activity, as many analysts believe given its wide usage in construction and telecommunications, its surge since the global credit crisis suggests the world economy is healing well.
Copper prices have bolted over 2.5 times since December 2008 and now stand just 10% under a record peak hit in July 2008.
The struggling euro took another knock from worries around Greece’s fiscal problems. The common currency was soft at $1.3388, within sight of an 11-month trough of $1.3265 hit late in March.
Hourly charts show if the euro breaches $1.3342, which marks the 76.4% retracement level of its ascent from $1.3265 to $1.3591, it may force it to retest levels around $1.3260.
The latest wave of selling, which traders said was led by macro hedge funds, was set off by reports that Greece wants to amend an EU-IMF safety net deal set up late last month to help pay for its debts in an emergency.
Although Greece denied the reports, the market paid no heed and continued to bet on Athens having troubles cutting its debt burden, even as its borrowing costs mount.
Investors demanded a yield of close to 7.5% for buying 10-year Greek bonds. That is nearly 100 basis points above levels seen last week, and over 400 basis points above German Bunds, the biggest premium since Greece joined the euro in 2001.