Hong Kong: Asian shares eked out gains and the euro extended its rise on Thursday after Greece announced fresh austerity measures to reduce its deficit and on data pointing to a rebound in the US jobs market.
Mining stocks were boosted by copper’s surge on the London Metal Exchange where the metal struck a 7-week high following the slide in the dollar, which fell after Federal Reserve officials said US interest rates will stay low for a long time.
The improvement in the US labour market and the dollar’s weakness also helped oil’s rise towards $81 a barrel overnight despite a US government report of a large rise in crude inventories.
The MSCI index of Asian shares outside Japan was up 0.2% in cautious trade, with investors not fully convinced about the robustness of the global economic recovery and doubtful about an immediate end to the debt crisis in Europe.
The gains were mainly driven by the materials and consumer staples sectors.
“There are still doubts whether Europe as a whole will be able to go through this relatively well because other countries in the region are also in quite difficult fiscal situations,” said Nicholas Yeo, investment manager at Aberdeen Asset Management.
Overnight, Greece announced plans for a further $6.5 billion in pay cuts and tax hikes to reduce its deficit. The EU endorsed the Greek plan but Germany stopped short of committing to explicit financial support.
Although market pressure on Greece has eased in recent days, a Reuters poll of economists showed on Tuesday that scepticism about the government’s ability to meet a goal to slash its deficit by four percentage points this year still runs deep.
Only 18 of 47 respondents said they believed Athens would meet that target.
Mining stocks such as Japan’s Sumitomo Metal Mining and Australia’s BHP Billiton and Rio Tinto all rose, boosted by copper’s gains and the dollar’s fall against the euro which made metals cheaper for non-US investors amid signs that demand was improving cropped up in the US and Asia.
Spot gold slipped on profit taking after hitting an intraday high around $1,144 on Wednesday following Greece’s new measures.
The dollar’s decline, sparked by the Fed comments, was hastened by investors moving to higher-yielding currencies like the Australian dollar. Traders also trimmed long positions in the US currency, which last week had built up to their highest since September 2008.
The dollar index slipped past the 80 level to 79.96, with short-term support seen around the 79.60 area - its 16 February low.
The euro inched up to $1.3712 in Asian trade from $1.3700 late on Wednesday in New York. It had risen to as high as $1.3736 in the previous session, after some stops were triggered at $1.3700.
Earlier this week, the euro had hit a 9-1/2-month low of $1.3432 on worries about the euro zone.
Economists are concerned about which euro area member might be the next troubled spot and only five of 65 economists now expect the euro/dollar to reach $1.50 in the next 12 months, compared to 15 of 62 in last month’s poll.
In contrast, 33 of 65 see the euro at or below $1.30 in the coming year, compared to just 11 of 62 in the February poll.