Hong Kong: Asian stocks rose to a one-month high on Monday, led by a rally in the technology sector, while the euro rebounded in thin trade, squeezed higher by dealers closing out of bets against the currency.
Global equities are set for a fourth consecutive session of gains, with the growth-sensitive materials sector likely to be in the driver’s seat again after being one of the most heavily sold sectors in recent months as investors cut exposure to riskier assets, fearing the worldwide recovery was losing momentum.
However, tech stocks were leading major indexes in Japan and South Korea higher, after semiconductor chipmakers last week gave positive news about demand, helping Wall Street recover early losses on Friday.
The fundamental picture has not changed much, with many economists still expecting the US economy to grow around 3% this year and next, even after May US retail sales unexpectedly fell for the first time in eight months.
“We’re seeing pretty active short-covering on a sense that recent risk avoidance moves were exaggerated, leaving markets oversold,” said Takashi Ushio, head of the investment strategy division at Marusan Securities in Tokyo.
Japan’s Nikkei share average rose 1.7%, with tech names TDK, NTT Data and Kyocera Corp all among the biggest boosts to the index. NTT Data gained 2.7%.
The market for semiconductors will likely grow 6 to 7% for the next five years, helped by strong demand in China, Morris Chang, Taiwan Semiconductor Manufacturing Co’s chief executive and chairman, told the Financial Times.
The MSCI index of Asia Pacific shares outside Japan climbed 1.1% to the highest since 19 May.
The index is trading at 11.5 times its earnings expected 12 months forward, a bit higher than at the beginning of June but still cheaper than the 5-year average of 13.2 times, Thomson Reuters I/B/E/S data showed.
With bets against the euro near record highs and bets on the Australian dollar slashed last week, dealers were prone to taking advantage of the relative quiet and trimming their positions.
The euro was up 0.4% to $1.2172, having earlier triggered small stop-loss orders all the way up to around $1.2207
This week the focus for the euro will be a meeting of European Union leaders on Thursday to convince sceptical investors they can tighten budgets to contain a sovereign debt crisis and boost growth at the same time.
The Australian dollar was up 0.5% to US$0.8560, having strengthened by nearly 4 cents in the last week.
Short-term investors in the International Monetary Market cut their bets on the Australian dollar in half in the week to 8 June, suggesting that positioning will not be an obstacle to further strength in the currency.
The Korean won leapt around 1.5% a relief rally after Seoul announced foreign exchange regulations over the weekend that were largely in line with expectations.
The weaker dollar was one of the factors pushing up oil prices. US crude for July delivery rose 1.1% to $74.56 a barrel
Since crude traded at a 10-month low on 20 May, it has drifted higher and gained $10.