Asia shares extend bull run

Tuesday, 30 January 2018 00:00 - - {{hitsCtrl.values.hits}}

SYDNEY (Reuters): Asian shares extended their bull run on Monday amid upbeat corporate earnings and strong global economic growth, while the dollar tried to bounce even as the White House continued to complain of “unfair” trade practices by competitors.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.4%, aiming for a 12th straight session of gains. It is up 8% for the year so far.

Japan’s Nikkei rose 0.5% as the yen eased a little, while South Korea notched a record.

Hong Kong’s Hang Seng also rose 0.5%. It has been the best performer for the year with a rise of more than 11%, followed by Shanghai blue chips with gains of nearly 9%, though the latter dipped on Monday.

Wall Street has likewise been on a tear. Just last week, the Dow rose 2.08%, the S&P 500 2.22% and the Nasdaq 2.31%.

Quarterly earnings growth for the S&P 500 is estimated at 13.2%, according to Thomson Reuters data, up from 12% at the start of the year. Of the 133 companies in the index that have reported, almost 80% beat forecasts.

Another 36% of the S&P 500 is due to report this week including heavy hitters Apple, Alphabet, Facebook, Microsoft and Amazon.

The rush to equities combined with the risk of faster global inflation, has been a major negative for sovereign bonds with yields rising across much of the developed world.

Yields on US two-year Treasuries have risen steadily to their highest since 2008 and are fully priced for a rate hike by the Federal Reserve in March.

Ten-year yields broke above the range of the last week or so to reach 2.69% on Monday, levels last visited in mid-2014.

The Fed holds its next meeting on Wednesday, the last for Chair Janet Yellen, and analysts suspect the statement will only cement expectations for a March move.

The inexorable increase in Treasury yields has not, however, been enough to rescue the US dollar which sank to three-year lows last week as US officials welcomed a weaker currency.

President Donald Trump did try and walk some of that back late in the week but by then the damage had been done.

Indeed, in an interview shown on Sunday, Trump threatened to confront the European Union over what he calls “very unfair” trade policy toward the US.

This was happening while the sum of trade and investment flows into the United States was shrinking. The opposite was happening in the euro zone, where the German export engine was powering an ever-expanding current account surplus.

The euro did run into a little profit-taking in Asia on Monday which nudged it to back to $1.2393 and away from a three-year peak of $1.2538 last week.