Singapore: Asian shares rose on Friday and the euro edged higher as traders placed modest bets that central banks will unleash further monetary stimulus measures, but volumes were razor-thin amid fears that Sunday’s Greek election could trigger market turmoil.
Global markets have been volatile this week amid uncertainty about the outcome of the poll, which could set Greece on a path out of the euro zone and increase the likelihood of financial contagion engulfing other weak economies in the bloc.
European shares are expected to open higher, with financial spreadbetters calling the main indexes in London, Paris and Frankfurt up 0.5-0.7%.
“Despite some traders pricing in a global deluge of cheap money, today’s gains on the open are seen as only modest,” said Jonathan Sudaria, a dealer at London Capital Group.
“The uncertainties of the Greek election and the subsequent volatility are far too risky for some to stomach taking positions home over the weekend.”
MSCI’s broadest index of Asia Pacific shares outside Japan rose 0.6%, while Japan’s Nikkei share average was flat.
Officials from the G20 nations, whose leaders are meeting in Mexico next week, told Reuters on Thursday that central banks were ready to take steps to stabilize financial markets - if needed - by providing liquidity and preventing any credit squeeze after Sunday’s election.
“The central banks are preparing for coordinated action to provide liquidity,” said a senior G20 aide familiar with discussions among international financial diplomats.
The news boosted US stocks, which closed up around 1% on Thursday, while the euro extended earlier gains. S&P 500 index futures were modestly higher on Friday.
Disappointing US state joblessness data, which showed new benefit claims rising for the fifth time in six weeks, dragged on the dollar, which eased by 0.3% against a basket of major currencies on Friday.
But the numbers, combined with falling consumer prices in May, also increased expectations that the Federal Reserve will deliver another monetary boost - and that supported equities and other riskier assets on Friday.
“The market looks slightly stronger but that doesn’t mean anyone is feeling any more confident about what’s coming up,” said Fujio Ando, senior managing director of Chibagin Asset Management in Tokyo.
“If you’re buying now you want to cut your exposure to Europe. Look at orders for industrial machinery crashing in Europe - the region is affecting everywhere else, just like in 2008.”
Korean stocks underperformed, dragged into the red by market heavyweight Samsung Electronics, which fell more than 3.5% after a 10-minute stoppage of its LCD production line due to a power outage.
The two-and-a-half-year-old European debt crisis has returned to the forefront of investors’ concerns in recent months, wiping out the robust gains made by global equities in the first quarter of the year.
No Greek party has called for Athens to quit the euro, but the leftist SYRIZA party, which is running neck-and-neck with conservative New Democracy, rejects the stringent terms of the country’s €130 billion international bailout, without which Greece will default.
If the election does not return a government committed to sticking with the bailout plan, investors fear a meltdown in the financial system that would force Greece out of the currency bloc and heap further pressure on struggling Spain and Italy.
Underlying the uncertainty, Moody’s Investors Service said on Friday it had downgraded five Dutch banks, with ING Bank kept on a negative outlook meaning it could be cut again, kicking off a long-awaited round of downgrades for major European institutions.
The downgrades did not hit Asian markets however, where the hopes being pinned on support from central banks helped the euro gain 0.1% to around $1.2640.
Hopes of further monetary stimulus were also boosted by Britain, which announced on Thursday it would flood its banking system with cash as the euro zone’s crisis casts a “black cloud” over its economy.
That broad stimulus hope helped lift commodities, viewed as riskier assets because demand is closely tied to economic growth expectations, with copper rising 0.8% to around$7,475 a tonne, on track for its first weekly rise in seven weeks.
Oil also gained, with benchmark US crude up 0.8% at around $84.55 a barrel, after OPEC agreed on Thursday to keep its collective output ceiling unchanged for the second half of the year at 30 million barrels per day. Brent crude also rose 0.8% to almost $98 a barrel. Gold was little changed around $1,624 an ounce.
But deep unease over Europe, where Spain’s 10-year bond yield hit a euro-era high above 7% on Thursday, kept demand high for safe-haven debt such as Japanese government bonds. The benchmark 10-year JGB yield slipped half a basis point to 0.855%.
“These yields aren’t great, but they might get even worse after the Greek election,” said a fixed income fund manager at a Japanese bank.