Singapore: Asian shares rebounded on Tuesday, led by resources stocks, after strong US manufacturing data raised hopes the global economic recovery was on a firmer footing as governments move to withdraw stimulus spending.
Japan’s Nikkei stock average rose 1.88% while resources firms such as Australian miners were among the best performers in the region, bouyed by prospects for the world economy and the outlook for oil and metals demand.
The US dollar steadied, after falling away from six-month highs on a basket of currencies, while the Australian dollar retained broad gains ahead of a widely expected interest rate hike later in the day.
The Institute for Supply Management’s manufacturing index showed US factory activity grew in January at a faster rate than expected, following similar surveys from China, Australia and the euro zone. and
Khiem Do, head of the Asia multi-asset group at Baring Asset Management, which oversees $50 billion, said the key to such positive data driving strong stock markets higher this year would be final demand in the United States, Europe and Japan.
“There is still a big question mark over that, which is why I think we will continue to see volatility in terms of what investors think about their growth prospects for this year,” he said, referring to the world’s major industrialised regions.
The United States, Europe and Japan have been the slowest to recover from the 2008-2009 global financial crisis and government stimulus measures are still a key source of their demand.
Much of the recent growth has come from emerging markets such as China, India and Latin America.
Besides responding to the bullish global factory data, Japan’s benchmark Nikkei index got a boost from Toyota Motor Corp , which rose 5.5% after it detailed plans on Monday to fix nearly 4.5 million vehicles equipped with faulty accelerators in North America and Europe.
The jump in the world’s top automaker comes after about an 18 percent tumble over the last seven business days.
Asia Pacific stocks outside Japan as measured by MSCI were up 1.5%, climbing from 3-month lows. The index lost 6.4% in January as a host of unsettling factors prompted investors to take profits after a 68% rally in 2009.
MSCI’s Asia exJapan resources index was up 3%, the biggest contributor to the rise in Asian shares. BHP Billiton Ltd , the world’s top miner, jumped 3.1% while Rio Tinto Ltd rallied 5%.
Shanghai copper was expected to open sharply higher on Tuesday, after a late turnaround in London copper on the firm US manufacturing data that saw the metal end up 0.7%.
The yen was broadly lower as investor appetite for riskier, higher-yielding assets improved just a little after the US data helped Wall Street stocks regain some ground
The dollar index a measure of the greenback’s performance against six major currencies, was down 0.35% at 79.182, off a high of 79.534, its strongest since late July.
The Aussie dollar edged up to $0.8920, extending gains made on Monday, ahead of a central bank rate decision at 9:00am.
All 20 economists polled by Reuters expect a 25 basis point hike in the cash rate to 4%, with the market pricing in a nearly a 80% chance of such a move.
Crude oil futures rose half a% or 42 cents to $74.86 per barrel after gaining by more than $1 a barrel in New York on Tuesday on optimism that the US economy has turned the corner.
Gold prices softened still hovered near $1,105 per ounce after posting their biggest daily gain in three months in the previous session boosted by the rally in oil, dollar weakness and strong US data.