Hong Kong: Asian stocks rebounded on Tuesday, a day after suffering their biggest percentage fall in 10 weeks, as Citigroup’s best results since 2007 raised investor optimism about earnings growth.
Investor appetite for riskier assets was supported by some positive US earnings reports, which helped Wall Street shares rise and countered fears about a broader regulatory impact from the fraud case brought against Goldman Sachs.
The dollar and yen eased as a sell-off in growth-linked currencies waned and risk-taking sentiment strengthened on expectations of global economic recovery.
The euro rose against the dollar after the German ZEW institute’s April economic sentiment index came in above forecast.
The Australian dollar surged after minutes from a central bank meeting hinted that more interest rate rises were in the pipeline, while tame inflation data pressured the New Zealand dollar as it made a case for a delay in monetary tightening.
The Reserve Bank of Australia (RBA) felt a hike to 4.25%, the fifth in six policy meetings, was needed because surging prices for iron ore and coal exports would boost the economy more than expected just a few months ago.
The hawkish tone to the minutes of its April meeting led some investors and analysts to bet it may raise rates yet again by another 25 basis points as early as May.
“A swift move to get back to normal levels seems almost certain,” said Bill Evans, the chief economist at Westpac. “We think that the next move will be in either May or June, and on balance, the very clear emphasis on the resources boom tips the scales towards May.”
Australian shares closed up 0.2%.
The MSCI index of Asia-Pacific stocks outside Japan rose about 1.2%, reversing some of Monday’s fall that followed news of the charges filed by the US Securities and Exchange Commission against Wall Street titan Goldman Sachs.
Hong Kong stocks pulled back from a three-week low, closing up 1%, with mainland plays such as China Mobile rising on expectations of growth in consumption and strong earnings.
Trading volume, however, fell to a one-week low with 1.42 billion shares changing hands.
“Everybody is cautious right now,” said Alfred Chan, chief dealer at Cheer Pearl Investment. “The Chinese government may move again against the property market, and the Goldman issue is also causing some concern among investors.
China Mobile rose more than 3%, but after the market closed, the world’s largest mobile operator by subscribers reported a first-quarter profit that lagged expectations, hit by hefty handset subsidies and declining revenue per user.
Shanghai stocks ended flat, after a massive slump the previous day weighed by property counters after government moves to clamp down on speculation in the real estate market.
“Despite an initial rise this morning, the day’s decline indicates the market still has room to fall,” said Cao Xuefeng, analyst at Western Securities.
Japan’s Nikkei average dipped 0.1%, a day after its biggest percentage loss in two months, with technical charts suggesting it may pull back further in the wake of its recent rally to an 18-month high.
Thailand stocks jumped more than 5%, after “red shirt” protesters called off a march to Bangkok’s business district following a stern warning from the army, but they threatened to stay in the capital’s shopping district “indefinitely”.
The supporters of ousted premier Thaksin Shinawatra also said they had enlisted their own special forces to tighten security in the shopping district they have occupied for 18 days, raising tensions in a bloody six-week protest demanding new elections.
Shares in South Korea rose 0.8%, shrugging off a report that North Korea was readying for a third nuclear test, as investors focused more on Goldman Sachs-related developments and a positive corporate earnings outlook.
There was general relief on views the Goldman Sachs situation would “not likely lead to a wider financial market scandal,” said Lee Sun-yeb, a market analyst at Shinhan Investment Corp.
Shares in airlines bounced back after losses in the previous session, with Korean Air Line, South Korea’s top air carrier, and Asiana Airlines climbing sharply.
Flights from large parts of Europe were set to resume under a deal to free up airspace closed by a huge ash cloud, but strengthened eruptions from an Icelandic volcano threatened to unravel the plans. Indian shares closed up 0.3%, led by financial stocks after the central bank raised key interest rates by an expected 25 basis points.
Shares in Singapore and Taiwan rose more than half a percent.
Gold rose back above $1,140 an ounce as a recovery in the euro and other commodity prices helped the metal regain some upward momentum after a two-session slide to its lowest since early April.
Oil rose past $82 a barrel as risk appetite improved ahead of Goldman Sachs results and some European flights resumed after a threat from spewing volcanic ash in Iceland receded.
Among other companies reporting this week are Coca-Cola, Apple, United Technologies and Johnson & Johnson.
Citigroup Inc posted a $4.43 billion first-quarter profit, its best result in nearly three years, as the economic recovery reduced the bank’s credit losses and increased prices on even its worst assets.
Thomson Reuters data showed that 83% of Standard & Poor’s 50 firms so far have beaten expectations for the first quarter. That compares to 61% for a typical quarter.