Singapore: Asian shares rose on Monday on encouraging economic data out of China and the United States, and as a deal on global bank rules gave lenders some respite before having to raise hundreds of bilions of dollars in fresh capital.
Japan’s benchmark Nikkei average rose 1.4%, while the MSCI index of Asian shares outside Japan was up 1.6% as the data encouraged investors to return to riskier assets.
Chinese factories increased production in August and money growth easily topped analysts’ expectations, according to data on Saturday, showing that the economy remained buoyant despite government efforts to clamp down on bank lending and property speculation.
Inflation in China sped to its fastest pace in 22 months, though the bulk of price rises stemmed from higher food costs, which analysts have said should be transitory after a spell of bad weather this summer.
For a full package of stories on the Basel III reforms, click Data on Friday showed US wholesale inventories surged the most in two years in July, adding to signs that economic growth in the third quarter of the year may prove a bit stronger than many forecasters had expected. The US trade gap also narrowed sharply in July.
The reports pushed up major stock indexes on Wall Street by as much as 0.5%.
While the US economy still seems mired in a slow-growth path, recent data have helped dispel some fears that it might be sliding back into recession.
Global bank regulators, aiming to prevent any repeat of the international credit crisis, agreed in Basel, Switzerland, on Sunday to force banks to more than triple the amount of top-quality capital they must hold in reserve.
But to ease the burden, regulators gave the banks transition periods to comply. These periods, extending in some cases to January 2019 or later, are longer than many analysts had expected.
Global bank and top European lender HSBC was up more than 2%, with some of Japan’s leading banks seeing similar gains.
“It’s a mixed blessing for the banks, but I’m sure investors will be happy to get some clarity and allow the market to move on,” said Robbert Van Batenburg, head of equity research at Louis Capital Markets in New York, said of the new rules, known as Basel III.
“... The best thing is it removes the uncertainty that was hanging over the market... The markets should take this favourably.”
The US Federal Reserve System’s Board of Governors said the decision should help minimise future financial meltdowns.
“The agreement represents a significant step forward in reducing the incidence and severity of future financial crises, providing for a more stable banking system that is less prone to excessive risk-taking, and better able to absorb losses while continuing to perform its essential function of providing credit to creditworthy households and businesses.”
The euro surged following the Basel agreement and the upbeat Chinese data, which also propelled the Australian dollar to its highest in four months against the dollar.
Automatic buy orders triggered at around $1.2720/30 and $1.2750/70 helped extend the euro’s rally to nearly 1%, but it later faltered at $1.2800
The euro has been in a downtrend against the dollar all year on concerns about sovereign debt and the European banking system.
“The introduction of the new Basel rules will be years away, so the market’s focus will soon shift back to more immediate factors, such as euro zone debt auctions and suspicions on the EU stress test,” said Keiji Matsumoto, strategist at Nikko Cordial Securities in Tokyo.
The low-yielding yen faltered as investors moved into riskier assets offering the prospect of stronger returns.
The dollar traded at 84.12 yen after hitting a 15-year low of 016583.34 last week. The euro rose to $1.2786 and gained to ¥107.55.
Gold, a traditional safe haven amid bad economic news, was slightly higher. Spot gold was hovering around $1,246 an ounce at 9:15am.
Oil reached a one-month high, partly as the Chinese data signalled continued strong demand from emerging economies. US crude futures for October climbed 1% to $77.20 a barrel.