Hong Kong: Asian stocks rose on Friday, reducing demand for government bonds, after a volatile week in which mounting global economic damage stung investor confidence and set up shares for their biggest weekly decline in two months.
Investors have been taking advantage of windows of calm to rebalance portfolios and even scoop up some bargains, but overall risk taking for higher returns was tame in the face of official warnings of more economic pain to come, drastic cost cutting by companies and data reflective of a global recession.
Wall Street rose slightly on Thursday on relief that a lot more US government money is likely to be used to soften the blow of a recession already a year old.
Bank of America Corp was reportedly close to receiving more emergency cash from Washington, as the cost of the financial crisis kept rising.
Oil prices stabilised around $35 a barrel but remained under medium-term pressure on expectations energy demand will continue to decline because of sharply falling global industrial output.
“We all know there will be a little bit more pain before the market finds its way. This whole market last year has been about confidence levels. That’s been shaken and it will take some time to recover,” said Lucinda Chan, division director at Macquarie Equities in Sydney.
The MSCI index of Asia-Pacific shares outside Japan climbed 1.8%, but was heading for its biggest weekly fall since the week of 23 November.
The index on Thursday hit its lowest since 8 December.
Japan’s Nikkei share average rose 1.3%, with shares of large exporters giving the index a boost thanks to a slightly weaker yen.
Hong Kong’s Hang Seng index was dragged down 0.8% by a 3.7% drop in HSBC shares after Goldman Sachs cut its rating on the stock to sell from neutral, citing expectations for 2009 losses.
Bank losses will be in focus later on Friday when Bank of America and Citigroup Inc., once titans of American banking, report fourth-quarter results.
Their shares fell sharply on Thursday as the two faced pressure from investors who question how they can continue to absorb growing losses from bad loans.
With share markets in Asia rising, investors turned away from assets, such as bonds, deemed as safe havens.
The yield on the benchmark 10-year US Treasury note, which moves inversely to the price, ticked up to 2.24% from 2.21% late on Thursday. However, the yield is still a whopping 167 basis points below levels in November.
March 10-year Japanese government bond futures slipped 0.13 point after hitting the highest for a lead contract since 16 September, just after the collapse of Lehman Brothers.
In currency markets, the euro climbed against the yen, following the rebound in shares. But some analysts were concerned about the euro’s prospects on concern that the European Central Bank may not be acting aggressively enough to support growth.
The euro climbed 0.4% from late New York trade to 118.25 yen, bouncing further from a six-week low of ¥116.24 the previous day.
US crude for February delivery dipped 10 cents to $35.30 a barrel, after sliding $1.88 to $35.40 on Thursday. The contract, which expires on Tuesday, touched the lowest since 19 December overnight.
Opec on Thursday forecast a fall of 180,000 barrels per day in world oil demand this year, 30,000 bpd steeper than its previous forecast.