Asia shares rise after ECB; focus on payrolls

Asia shares rise after ECB; focus on payrolls

Tokyo: Asian shares rose and the euro steadied on Friday after the European Central Bank (ECB) outlined its bond-buying scheme to help calm the euro zone’s debt crisis, while firm US data fed speculation of a strong jobs report later in the day.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5% after European shares rallied to six-month highs and US stocks closed at multi-year highs on Thursday.

The euro traded at $1.2632, not far from a near 10-week peak of $1.2652 hit on Thursday. It stood at 99.65 yen, just below a two-month peak at 99.80 yen touched on Thursday.

Risk-sensitive commodity currencies were firmer, with the Australian dollar at $1.0281 after jumping nearly 1% to $1.0300 on Thursday, its biggest one-day gain in a month.

The safe-haven Japanese yen was on the defensive, trading at 78.88 yen, after falling to a two-week low of 79.04 yen on Thursday as the dollar gained on higher US Treasury yields.

“ECB’s action has been priced in after earlier reports and contained nothing new, but there was no ‘selling the fact’, probably because currencies followed the rally in stocks. It appears markets are warming up to a risk-on mode," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.

“Markets may be sensing that while it takes time to deliver, things will get done eventually. Also, firm US data put great emphasis on the payrolls data today," he said.

A strong payrolls could bolster the dollar and help sustain the positive momentum generated by ECB, while a weak report could turn around the mood completely, he added.

ECB agreed on Thursday to launch a new and potentially unlimited bond-buying programme, focused on bonds maturing within three years in countries implementing approved fiscal austerity measures.

ECB president Mario Draghi said the plan would not target specific bond yields. Debt purchases would follow on from the bank’s securities markets programme that has been dormant since March, and would be suspended if countries did not comply with the terms.

Government debt yields in highly indebted Spain and Italy fell, while safe-haven US treasury and German bond yields jumped, as ECB’s plan was seen reducing the risk of the euro zone slipping deeper into chaos.

Market sentiment also improved after data showed US private employment rose more than expected in August and growth in the services sector gathered pace.

The solid employment report precedes the government’s nonfarm payrolls report due later on Friday, with expectations it will show 125,000 jobs were added in August.

A stable labour market would reduce pressure on the Federal Reserve to take aggressive monetary easing at its 12-13 September policy meeting, such as one-third round of bond buying known as quantitative easing, to underpin growth.

“If the US non-farm payrolls match the ADP report, then it may have an even better effect than a third round of quantitative easing. It will be like getting rid of a cold without having any medicine," said Rhoo Yong-seok, head market analyst at Hyundai Securities in Seoul.

Spot gold held near $1,700 an ounce after climbing above that level for the first time in six months on Thursday. Expectations for a more accommodative US monetary stance have underpinned gold prices.

US crude fell 0.7% to $94.86 a barrel, while Brent fell 0.6% to $112.86.

Asian credit markets gained strongly, with the spread on the iTraxx Asia ex-Japan investment-grade index tightening by 8 basis points. Reuters

Christine Kim in Seoul contributed to this story.

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