Hong Kong: Asian stocks rose on Wednesday as investors were drawn back to riskier assets by attractive valuations, while Japanese exporters were helped by the yen’s weakness on expectations of interest rate rises in Europe and the United States.
Renewed demand for equities came despite concerns the global economy could be hurt by Japan’s struggle to contain the world’s worst nuclear crisis in decades, conflicts in Libya and the Middle East and Europe’s festering sovereign debt problems.
Investor concerns over those risks have eased, for now, with expectations that stocks worldwide will move higher into the new quarter, analysts and traders said.
“Global equities are stronger and it’s risk-on again,” a trader at a U.S. investment bank said.
Japan’s Nikkei index rose 0.48% in early trading, after two days of losses. So far in March, it has shed 9.9%, heading for its worst month since May 2010. For the year to date, the benchmark has fallen 6.4%.
Other Asian equities have recovered from their losses since a devastating earthquake and tsunami hit northeast Japan on March 11. MSCI’s index of Asia-Pacific shares outside Japan was up 0.49% on the day. It has risen 3.5% so far in March and up 0.1% quarter-to-date.
MSCI’s world index rose 0.2%, taking its gains for the year so far to about 3%, with weakness in Asia offset by strong gains early in the year in major indexes in the United States and Europe as investors rotated from emerging markets to large, developed ones.
The yen dipped to a 10-month low against the euro and neared a three-week trough versus the dollar early in Asia, having suffered broad losses after several chart support levels were breached and on expectations of rising rates in Europe and United States.
In recent days, several top US central bank officials said further bond purchases by the Federal Reserve were not needed to support the economy, while European Central Bank President Jean-Claude Trichet signaled his inflation concerns from rising food and energy prices.
“We’ve had comments from the Fed and a shift in sentiment towards the U.S. policy from a rate perspective that has really pushed US-Japan yield differentials, driving the dollar higher,” said Mitul Kotecha, head of global FX strategy at Credit Agricole in Hong Kong.
Traders have been adjusting their books and most investors have moved to the sidelines in advance of the last day of the quarter and Japan’s fiscal year. Light volume has heightened intraday volatility across financial markets.
The dollar rose as high as ¥82.87, well above the 76.25 all-time low, which it scaled in the week after the quake.
The euro climbed to ¥116.69 after breaking through major resistance around 115.50/60, a level that has capped the pair since May 2010. It last traded at 116.67.
Among precious metals, gold was flat, paring initial gains, after four consecutive losing sessions as hawkish central bank comments reduced its appeal as an inflation hedge.
Spot gold traded at $1,415.89 an ounce, after traded as high as $1,419,50 earlier. This compared with $1,415.95 late in New York on Tuesday. It is 2% below the record high of $1,447.40 set on March 24.
US oil prices fell as an expected rise in US domestic crude stocks offset worries over turmoil in Libya and the Middle East.
Several Opec producers have boosted output recently to make up for supply disruptions in Libya as rebels fight government forces, easing supply concerns.
US crude fell 61 cents to $104.19 a barrel, while Brent crude slipped 57 cents to $114.59.