Asia stocks cling to gains, US data spurs dollar

Asia stocks cling to gains, US data spurs dollar

Hong Kong: Asian stocks rose on Thursday, buoyed by solid earnings from major exporters such as Toyota and chipmaker UMC, while upbeat US economic data lifted the beaten-down dollar and eased some concerns about its recovery.

European markets were also expected to rise following stronger-than-expected growth in the U.S. services sector, though traders were cautious ahead of US non-farm payrolls data on Friday.

Financial bookmakers expected Britain’s FTSE 100, Germany’s DAX and France’s CAC-40 to open as much as 0.4% higher, with investors also eyeing central bank meetings later in the day.

Both the European Central Bank and the Bank of England are expected to keep interest rates at record lows as they wait for more evidence that their economic recoveries are taking hold.

In Japan, strong results from Toyota Motor Corp pushed the Nikkei average 1.7% higher, reversing much of Wednesday’s 2.1% drop when investors worried that exports would suffer as the yen rallied towards 15-year highs against the dollar.

Toyota climbed more than 3% before losing some steam after reporting its biggest operating profit in two years and lifting its forecasts.

The MSCI index of Asia Pacific ex-Japan stocks edged up 0.1%, on the heels of a 2.3% rise this week to a three-month high. Consumer staples and resources outperformed.

“We had four weeks of fantastic markets, so some correction is to be expected," said Khiem Do, head of the Asia multi-asset group at Baring Asset Management, which oversees $50 billion.

“A few months ago, investors were drumming up fears of a double dip recession but second quarter results were quite good, so analyst are revising their numbers up again. A see-saw pattern is developing and seen continuing over the next few months."

In Taiwan, United Microelectronics Corp (UMC), the world’s second-biggest contract chipmaker, rose 0.7% after it reported strong quarterly earnings and an increase in its 2010 capital spending plans.

The dollar index was steady against a basket of other major currencies after a rare rally on Wednesday when the US services data sparked a bout of short-covering.

Against the yen, the dollar was down 0.1% on the day at ¥86.19 after rising to ¥86.29 from an eight-month low of ¥85.32 hit on Wednesday.

The yen’s pullback against the dollar and stronger Tokyo stocks prompted traders to take profits on Japanese government bonds after a rally that took the benchmark 10-year yield to a seven-year trough below 1% on Wednesday. The yield climbed 1.5 basis points to 1.010% on Thursday.

Optimism over the US services data has offset to some extent expectations the U.S. Federal Reserve might take further steps into quantitative easing at its policy meeting next week, undermining safe-haven US Treasuries and JGBs.

“Not only is the services sector - the vast bulk of most modern economies - expanding, it is doing so at a faster pace," said Adam Carr, a senior economist at broker ICAP, referring to the U.S. data.

“Commodities are telling us that this global recovery has reasonable momentum," he said, adding that iron ore prices had risen around 20% in the past month, while copper was up 16% and wheat 40%.

Commodity-linked currencies such as the Australian and Canadian dollars also remained strong.

The Aussie hovered around three-month highs against the dollar. It was firm at $0.9158, off the day’s high of $0.9182. The dollar slipped to its lowest in six weeks against the Canadian currency

But another commodity-linked currency, the New Zealand dollar, fell after local jobless data proved weaker than expected, prompting markets to scale back expectations for more interest rate rises this year.

The currency, which normally tracks commodity trends, fell 0.7% to $0.7300

Aggressive bets are also coming off ahead of the US jobs data on Friday. The report is expected to show a drop of 65,000 in July as Census jobs dried up.

U.S. companies hired more workers in July than forecast, payroll-processing company ADP said on Wednesday, but analysts said the gains were too slow to reduce stubbornly high unemployment or give a significant boost to the economy.

Oil prices fell for a second straight day, moving towards $82 a barrel, crimped by the dollar’s strength and after US stocks of gasoline and distillate fuels, including diesel, added to a string of gains.