Wellington/Sydney: Asian stocks rose, putting the regional benchmark on track for its biggest weekly advance since April, on optimism policy makers from the US to Japan will maintain monetary stimulus. Precious metals and copper futures climbed while crude oil fell a second day.
The MSCI Asia Pacific Index of 1,003 regional equities added 0.2% by 9.58am in Tokyo, rising for a fourth day to rally 3.2% since 5 July, a third week of gains. Standard & Poor’s 500 Index futures fell 0.2% after the gauge jumped 1.4% to a record in New York. The yen held gains versus the dollar before Japanese industrial output data, while Australia’s currency and bonds dropped. West Texas Intermediate crude fell 0.4%. Copper was on track for the highest close since 17 June.
Central banks around the world have buoyed bonds and helped stoke a 32% advance in global equities since 2010 by cutting interest rates, injecting liquidity and buying assets. Federal Reserve chairman Ben Bernanke and the Bank of Japan both indicated this week that they will maintain stimulus, after the European and British central banks signalled they will keep key rates low. Chinese economic growth slowed for a second quarter in the three months to 31 March, according to a survey of economists before data due 15 July.
“Monetary conditions are still very stimulatory and markets can get some comfort from that,” Chris Green, an Auckland-based strategist at First NZ Capital Ltd, a brokerage and wealth management firm, said by phone. Even though there is a recognition that tapering is on the way, the market has got more confidence that it’s not touching the brakes, just easing off the accelerator. That will be supportive for equities for some time.
Australia’s S&P/ASX 200 Index added 0.7%, putting the measure on track for a 3.3% weekly advance, the most since the end of April. South Korea’s Kospi Index lost 0.5%, led by automakers, trimming its climb in the week to 1.9%. Japan’s Topix Index rose 0.5%. The gauge has risen 1.1% this week, the fourth week of gains and the longest stretch of weekly advances since March.
MSCI’s Asia Pacific index has regained 8.4% from a more than six-month low reached 25 June, data compiled by Bloomberg show. The MSCI All-Country World Index has added 3.4% so far this week, set for the steepest weekly advance since November.
The S&P 500 rose for a sixth straight day, its longest rally since March, with trading volumes 2.6% lower than the 30-day average. The US benchmark has recouped all of a 5.8% slide from 22 May to 24 June triggered after Bernanke told Congress the Fed could taper bond purchases should the economy continue to improve. The Nasdaq-100 Index capped its 12th day of gains, the longest rally in three years.
Benchmark 10-year US Treasury yields were little changed at 2.57%, after climbing to 2.75% earlier this week, the highest level since August 2011. Futures on the notes were little changed after surging the most in more than a year on Thursday.
US stocks rallied even as labour department figures showed the number of Americans filing for unemployment benefits unexpectedly increased to a two-month high of 360,000 last week. The median forecast of 47 economists surveyed by Bloomberg called for a drop to 340,000. Claims are difficult to adjust in July for seasonal events such as vehicle plant shutdowns and the Independence Day holiday, a government spokesman said.
After signalling from May that the Fed’s $85 billion-a-month bond buying programme could be reduced as risks to the US economy abate, Bernanke said 10 July that highly accommodative monetary policy was needed for the foreseeable future.
Minutes of the Fed’s June meeting released 10 July showed about half of the 19 participants in the Federal Open Market Committee wanted to halt the bond purchases by year end. The minutes also showed many wanted to see more signs that employment is improving before backing a reduction in the pace of asset purchases. Data last week showed US employers added 195,000 jobs last month, beating the increase of 165,000 predicted by economists.
“Everyone realizes that Fed policy is going to remain extraordinarily accommodative,” Hank Smith, who oversees $7 billion as chief investment officer at Radnor, Pennsylvania-based Haverford Trust Co, said by phone on Thursday. “The market has adjusted to this and we’re back to where we were prior to the Fed’s announcement of what was really a very subtle shift in policy.”
The MSCI Emerging Markets Index climbed less than 0.1% in early trading, up 2.8% this week after jumping the most in almost 10 months on Thursday.
Futures on Hong Kong’s Hang Seng Index rose less than 0.1%, indicating the gauge may rise for a fourth day to post a jump of more than 2.5% in the week. Contracts on the Hang Seng China Enterprises Index climbed 0.4%. The gauge of Chinese stocks traded in Hong Kong has increased 3.7% so far this week.
China’s economy, the world’s second-biggest, expanded 7.5% in the second quarter, according to the median of 40 estimates compiled by Bloomberg from economists and analysts. growth slowed to 7.7% in the first three months of 2013, from 7.9% in the last quarter of 2012.
Singapore’s gross domestic product expanded an annualized 15.2% from the first quarter, versus a median estimate of 8.1%, government data on Friday showed.
Asian stock volatility is decreasing. The Nikkei Volatility Index dropped 5.9%, declining for a ninth day to the lowest level since May and set for the steepest weekly retreat since October, declining 20%. The HSI Volatility Index in Hong Kong has retreated over the past three days. The Kospi 200 Volatility Index in Seoul rose 1.5%, after falling over the previous three days.
The dollar weakened against nine of its 16 major peers on Friday. The Bloomberg Dollar Index, a gauge of the US currency against 10 major peers, was little changed at 1,034.8, after sinking 1.4% to the lowest level in three weeks on Thursday. The ICE Dollar Index retreated 1.5% on Thursday, the lowest close since 25 June. It was little changed at 82.74 on Friday.
The yen was little changed at 98.98 per dollar and was steady at 129.66 per euro, after sliding 0.2% on Thursday. The currency gained 0.7% versus the greenback on Thursday to the strongest close since 27 June as the Bank of Japan said at the end of its two-day meeting that it would retain its plan for monetary stimulus.
The yen will depreciate to 115 per dollar by the end of this year on concern over the prospect of a slowdown in Fed asset purchases this year, according to Commerzbank AG.
The Australian dollar slipped 0.4% to 91.53 U.S. cents, trimming its first advance in four weeks to 1%. Government 10-year bond yields rose three basis points, or 0.03 percentage point, to 3.77%, increasing for the first time in four days. New Zealand’s currency slid 0.3% to 78.33 cents, up 1.6% in the week.
Korea’s won slipped 0.2% to 1,124.35 a dollar, retreating for the first time in four days and trimming a 1.6% weekly advance.
Gold rose 0.2% to $1,288.39 an ounce, gaining a fifth day to cap a 5.3% weekly advance, the most since October 2011. The precious metal closed at the highest level since 21 June on Thursday.
Traders are the most bullish in five weeks on gold after Bernanke’s comments on stimulus. Of 31 analysts surveyed by Bloomberg, 19 expect prices to rise next week. Unprecedented money printing by central banks since the global recession has boosted bullion buying as a hedge against inflation.
Silver gained 0.3%, while platinum added the same amount and palladium rose 0.5%. Copper futures rose a third day, adding 0.4% and poised for the highest close since 17 June. Futures due in December on rubber fell 0.7% after rallying 4.4% on Thursday.
Zinc and nickel for three-month delivery rose at least 0.2% on the London Metal Exchange, while tin slid 0.5%. Soybean futures maturing in November added 0.2%.
WTI slipped to $104.53 a barrel, after tumbling 1.5% on Thursday and retreating from a 15-month high. Crude has still gained 1.3% this week, a third week of gains. Futures on oil due next month added 0.6% and natural gas contracts declined 0.2%.