Hong Kong: Asian stocks jumped to a one-month high on Tuesday, with banks extending gains on hopes the struggling global financial system is stabilising, despite reports showing the US economy is deteriorating further.
Major European stocks were expected to open slightly lower, with dealers expected to pause after a five-day winning streak.
The dollar edged higher against the euro and the yen while US Treasuries were steady, awaiting word on whether the Federal Reserve would buy government debt to stimulate the economy.
Barclays Plc said on Monday it has had a strong start to the year, echoing upbeat comments in recent weeks from Citigroup, JPMorgan and Bank of America and helping the financial sector provide one of the biggest boosts to regional shares.
“We still can’t really relax, since we won’t know the full details of this profit until quarterly results come out, and there’s still a lot of uncertainty,” said Takashi Ushio, head of the investment strategy division at Marusan Securities in Japan.
The rebound has squeezed some investors who bet against equities, forcing them to buy back shares, but analysts are divided over whether the rally can be sustained without a broad recovery in investor confidence.
The MSCI index of Asia Pacific shares traded outside Japan rose for a third day, gaining 1.75% to a one-month high, with the materials, financial and consumer staples sectors providing the most support.
Japan’s Nikkei share average rose 3.2% to its highest close since 9 February amid strong gains in banking shares. On a 20-day rolling basis, the Nikkei’s respectable 4% gain has outperformed the 0.3 percent loss on European stocks and a 2.6 percent decline in US shares
Australia’s benchmark S&P/ASX 200 index rose 3.1%, also powered by banks. Shares of Westpac Bank rose 3.4 percent, while Commonwealth Bank of Australia climbed 4.7%.
Hong Kong’s Hang Seng index climbed 2% and was on its way to a sixth consecutive winning session. A shift out of bets against HSBC pushed the shares of Europe’s biggest bank up 5%.
Wall Street snapped a four-day winning streak overnight after American Express Co said its credit card default rates soared last month, hammering home the heavy toll the financial crisis has had on US consumers.
US industrial output fell to its lowest level in almost seven years in February, while manufacturing in New York State slumped further this month, data on Monday showed.
US Treasuries were largely steady ahead of a two-day policy meeting of the Federal Reserve that begins on Tuesday.
The yield on the benchmark 10-year note has been unable to rise above 3% after four attempts in the last few months, with investors wondering if the Fed will soon start buying long-dated Treasuries to drag rates lower in other markets.
Goldman Sachs economist Ed McKelvey still believes the Fed will shy away from that option for now because the worst of the consumer retrenchment may have passed, equity markets have improved lately and recent comments from Fed officials have suggested otherwise.
The Bank of Japan is expected to discuss whether to raise its purchases of government debt at a two-day meeting ending on Wednesday, but market participants were unsure if the central bank will make such a move at this week’s board meeting.
Outright purchases of government bonds is one of unorthodox policy options some central banks, such as the Bank of England, have resorted to because they have already chopped interest rates down to nearly zero.
The euro edged up against the US dollar, in sight of five-week highs hit the previous day and girding for a clear break above $1.3000. Positive comments from commercial banks have improved confidence among investors and whetted their appetite for risk, though scepticism was endemic.
Gold slipped 0.5% to $918.50 per ounce in the spot market, inching lower as the equity rally gathered pace.
US crude for April delivery slipped 0.4 percent to $47.16 a barrel Since the beginning of the year, oil has bounced around a range of $50 to just below $40.