Singapore: Asian shares powered ahead on Wednesday with energy and resources stocks leading the way, as demand for riskier assets increased after Wall Street rallied on upbeat US earnings and economic data.
European stocks were set to gain for a fourth straight session on strength in Asian and US markets, with investors awaiting the European Commission’s assessment of Greece’s deficit cutting plan and the US ADP employment report later in the day.
US stock futures also pointed to a slightly firmer open after Wall Street posted two days of strong gains on encouraging economic data, which have helped dispel fears in recent weeks that America’s economic recovery may be running out of steam.
Rising sales of previously owned US homes and robust earnings from US bellwethers in the consumer and industrial sectors pointed to a steady rebound in demand, fuelling gains of as much as 1.3% in key US stock indexes overnight.
But some analysts cautioned against predicting a strong run in Asian stocks despite the appearance of more appetite for risk.
While companies overall had been beating earnings estimates, not a lot of upgrades had been forthcoming, said Andrew Orchard, strategist at Royal Bank of Scotland in Hong Kong.
“We see it as a year of volatility, a year of consolidation with maybe single digit returns between the positive and the negative,” said Orchard.
“Of course between the months you could see a few weeks of rallies, a few weeks of sustained falls, but overall we think it won’t be too different from where we began the year.”
Japan’s Nikkei stock average edged up 0.3%, with rises by exporters on the strong US data offsetting declines for Toyota Motor Corp, whose US sales slid 16% after its massive vehicle recall.
Fears of an extended sales slump pushed Toyota down 3.7%, compounding a slide that has sent the stock down 17% since its recall was announced on 21 January.
All eyes will be on Toyota when it announces Q3 results on Thursday and how the recall will affect its 2010 earnings forecasts. Rival Honda Motor Co reports Q3 results later on Wednesday.
Asia Pacific stocks outside Japan as measured by MSCI rose 1%, climbing further away from 3-month lows.
MSCI’s Asia exJapan resources index was up nearly 2%, the biggest contributor to the rise in Asian shares for the second day in a row.
Shanghai copper was seen rising around 1% at the open on Wednesday after fresh gains in London, as the latest batch of positive US data helped soothe jangled investor nerves.
Top Australian miners had been sold down over the past few weeks on worries about moves by China, their biggest customer, to rein in bank lending. But signs of a sustainable global recovery have lured investors back into resources stocks. “At the end of the day demand for commodities will remain reasonably robust. I don’t see anything that’s happened to derail that theory,” said David Spry, research manager at broker FW Holst.
Global miner BHP Billiton rose 2.4%.
The dollar index hovered around the 79 mark, after retreating from a six-month high of 79.547 struck on 31 January.
The Australian dollar was at $0.8848, bouncing from a low of $0.8780 on Tuesday and recovering some of the losses suffered when the Reserve Bank of Australia left its benchmark rate unchanged at 3.75%, defying expectations of a rate hike.
The euro held on to gains made overnight, climbing to $1.3953 in Asian trade. It faces a stiff fight uphill as credit worries related to Greece fester in the background.
US crude futures slipped back below $77 a barrel on Wednesday after an industry report showed a bigger than expected build in US crude oil stockpiles last week.
NYMEX crude for March delivery was down 34 cents at $76.89 a barrel by 0016 GMT, after settling $2.80 higher on Tuesday, when the encouraging economic data and a weak dollar helped boost prices.
Gold prices were steady at around $1,114.65 per ounce after hitting their highest level in almost two weeks the previous day, with investors cautiously awaiting US jobs data later this week to gauge prospects for the US economy and the dollar.
The US ADP employment report due later on Wednesday could give some clues to the closely watched non-farm payrolls report on Friday. Policymakers fear consumer demand will not rebound decisively until unemployment figures begin to come down.