Asian stocks push to nearly three-year high

Filomena Scalise

Filomena Scalise

Published Jun 9, 2014

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Tokyo - Asian stocks touched their highest levels in nearly three years on Monday, basking in the glow of a record close on Wall Street after bright US jobs data pointed to improving economic momentum.

The dollar, meanwhile, continued to benefit from rising US Treasury yields.

US jobs data on Friday showed that nonfarm payrolls increased by 217 000 last month, bringing employment back to its pre-recession level and validating the view that labour conditions are improving. The unemployment rate held steady at a 5-1/2 year low of 6.3 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan was up about 0.4 percent, reaching its highest levels since July 2011.

Japan's Nikkei stock average added 0.5 percent after touching a three-month intraday high, as it got a tailwind from a modestly weaker yen.

On Friday, the Dow Jones industrial average and S&P 500 ended at new records. For the week, the Dow, the S&P and the Nasdaq Composite all added more than 1 percent, with the Nasdaq rising 1.9 percent.

Weekend trade data from China also supported the view of a recovering global economy, with exports gaining steam last month. But the same data also contained some cause for concern, as a surprising drop in imports could herald weaker domestic demand.

China's yuan rose after the People's Bank of China unexpectedly fixed its daily midpoint surprisingly higher against the dollar for the second straight session, which in turn gave a lift to other Asian currencies.

China is slated to release industrial output, retail sales and fixed-asset investment data on Friday.

The yield on benchmark 10-year Treasuries stood at 2.613 percent, up from Friday's US close of 2.597 percent and well above 11-month lows plumbed last month.

By contrast, Italian, Spanish and Irish bond yields fell to record lows on Friday, a day after the European Central Bank unveiled a package of easing steps.

“The yield on 10-year US Treasuries may need to sustain a move back above 2.6 percent area to increase the likelihood of the greenback move through the 102.80 level against the yen,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said in a note to clients.

For now, the dollar had to be content with a 0.1 percent gain to buy 102.52 yen, getting some help from Japanese current account data released early on Monday.

Japan posted a lower-than-expected surplus in April, as income gains from overseas investments narrowed and the trade deficit widened. Still, it marked the third consecutive month of surpluses.

Other data on Monday showed Japan's economy grew 1.6 percent in January-March from the previous quarter, revised up from a preliminary 1.5 percent expansion due to faster growth in capital expenditure.

The euro also gained on its Japanese counterpart, edging up slightly to buy 139.88 yen, after earlier testing its highest levels since mid-May.

Against the greenback, the euro was steady on the day at $1.3644.

“The series of measures unveiled by the ECB will not start having an impact right away. As such, short covering of euro short positions, which had built up considerably prior to the ECB meeting, is being covered by participants pocketing profits,” said Shinichiro Kadota, chief Japan FX strategist at Barclays in Tokyo.

In commodities, US crude gained about 0.2 percent to $102.89 a barrel, underpinned by the solid jobs report that pointed to an improving economy and suggested that oil demand will increase. US crude ended last week almost unchanged.

Brent crude futures edged up 01 percent to $108.76, after dropping 0.7 percent last week.

Spot gold was steady on the day at $1,252.86 an ounce. - Reuters

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