Tokyo: Asian shares climbed to their highest level in seven months on Tuesday on fresh hopes the global recession is easing, and oil hovered at six-month peaks as supply concerns helped buoy up prices.
The dollar struggled, as did the yen, after both tumbled the previous day when a 3% gain in US shares boosted investor confidence that the global downturn may be slowing, encouraging buying in commodity currencies and other majors.
In Tokyo, the benchmark Nikkei average rose 2.8%, with exporters such as Canon Inc helped by the yen’s retreat after a top finance ministry official gave a warning about recent yen strength and its impact on the economy.
But analysts were cautious ahead of data on Japan’s gross domestic product on Wednesday, which is forecast to show the world’s second-largest economy contracted 4.2% in January to March, likely its worst quarterly contraction since World War II.
“Nobody really wants to take on new risk ahead of this,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management.
“At the same time, there’s a bit of risk from currency movements, and while the dollar recovered yesterday against the yen on a Japanese official’s comments amounting to verbal intervention, these gains are shaky.”
US stocks rallied on Monday as better-than-expected results from the No. 2 US home improvement retailer, Lowe’s Cos Inc , helped spark broad-based buying on hopes consumer spending is stabilising. A revival in badly battered US consumer confidence is key to a broader global recovery.
The Dow Jones industrial average gained 2.85% to 8,504.08, the Standard & Poor’s 500 Index rose 3.04% to 909.71 and the Nasdaq Composite Index advanced 3.11%. S&P futures were steady in Asian trade.
Positive but cautious
Officials at the World Bank, European Central Bank and US Treasury also offered cautiously upbeat comments, with Treasury Secretary Timothy Geithner saying the US economy had “clearly stabilised” although he warned things would remain “bumpy”.
The MSCI index of Asian stocks outside Japan hit its highest since October, although India’s main stock index slipped after soaring more than 17% on Monday as investors cheered a decisive election victory by the ruling coalition, which could open the way for more economic reforms.
Miners including BHP Billiton helped lift Australian shares by 2%, while energy stocks in Hong Kong soared after a jump of nearly 5% in crude prices on Monday.
Oil prices steadied around $59 a barrel on Tuesday after climbing on concerns about supply following unrest in Nigeria, where militants threaten to disrupt crude exports, and following a fire in a key US refinery.
The dollar, which hit a two-month low of ¥94.55 on Monday before rebounding more than 1%, rose a further 0.1% to ¥96.40 but lost ground to the Australian dollar edging back towards a recent seven-month low.
The Australian dollar also stood within sight of a recent seven-month peak on the yen, underpinned after Reserve Bank of Australia Governor Glenn Stevens said domestic interest rates were “pretty low” but then also cautioned against expectations for a quick recovery.
The euro and sterling also held on to gains made against both the dollar and yen the previous day, with sterling edging towards its highest since early January against the dollar.
Gold rose on light cash buying to around $920 per ounce, but investors were cautious that improved US housing data could further dull the metal’s appeal as a safe haven from volatility.