Hong Kong: World stocks struck a four-month peak on Thursday, powered by gains in Asia, as investors took heart from signs of improvement in the US economy suggesting regional exporters may need to start cranking up production.
A record drop in US business inventories in the first-quarter and surprisingly robust consumer spending were widely seen by economists as positive pointing to a growth pick-up in the world’s largest economy in coming months.
The US Federal Reserve tweaked its policy statement to say that the economic outlook was improving, while vowing to keep rates at a historic low for a long stretch.
Safe-haven government bonds slid and higher-yielding currencies tied to risk appetite such as the Australian dollar jumped against the low-yielding yen.
“Data out of the US is a big factor boosting the market,” said Takahiko Murai, general manager of equities at Nozomi Securities in Tokyo.
Data in Japan showing industrial production grew twice as much as expected in March thanks to strong Chinese demand for electronics is one of the main factors fuelling the rally in Asian technology shares in the past two months.
The multiple signs of economic activity recovering around the world has stoked expectations that Asian companies and exporters may have cut inventories too quickly and may need to switch gears and start restocking to meet demand.
Investors have also taken in stride the outbreak of swine flu around the world that prompted the World Health Organization or WHO on Wednesday to raise its threat level, saying the world is on the brink of a pandemic.
Mexico’s government called for all businesses that are not crucial to the economy or public safety to close between 1-5 May to help contain the swine flu outbreak.
Taiwan’s TAIEX index was poised for its biggest daily gain in 19 years, up 6.8% in morning trade, on expectations for an influx of Chinese investment after a series of cross-straits talks have led to warmer ties between the two countries.
The MSCI index of Asia-Pacific shares outside Japan jumped 3.8% to hit a six-month peak.
The move came as the forward 12-month earnings per share for the regional benchmark touched 13.99, the highest since January 2008 and up sharply from a low of 7.87 touched in November when the index hit a five-year low, according to data from Thomson Reuters I/B/E/S.
The solid gains in Asian equity markets outpaced the 2.1% rise in the US S&P 500 index on Wednesday, while S&P futures were up 0.5% and pointing to a positive start when US markets open later in the day.
Thursday marks the last day of the week for many markets around the world observing 1 May holidays. In Asia, markets in South Korea, Taiwan, Hong Kong and Singapore among others will be closed on Friday.
Japanese markets will be open but then close Monday through Wednesday for the rest of the country’s Golden Week break.
The Australian dollar was up 0.5% at $0.7280, holding hefty gains scored the previous day as market players chased the relatively higher-yielding currency on the rally in equities.
But the New Zealand dollar tumbled about 1% to a low of $0.5634 after the country’s central bank cut interest rates by half a point to a record low of 2.5%, as expected, and pledge to keep rates low for a while.
The rate cut and remarks drove the two-year New Zealand swap rate down about 20 basis points.