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Tokyo (Reuters): Asian shares vaulted to 10-year highs on Thursday as solid economic data from the United States and Germany reinforced investors’ optimism, while oil prices hovered at a 2-1/2-year high with unrest in Iran stoking supply disruption concerns.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%, extending its gains so far this year to 2.4%.
Japan’s Nikkei jumped 3.3% on its first trading day of the year, hitting its highest level in a quarter of a century.
“The economic data published over the holiday period has been pretty good. So for those who were worried about new year profit-taking, the market would look pretty strong,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
The economic data published on Wednesday on both sides of the Atlantic reinforced investors’ expectations that solid global growth will boost demand of goods, including oil, and lift corporate earnings.
U.S. factory activity increased more than expected in December, boosted by a surge in new orders growth, in a further sign of strong economic momentum at the end of 2017.
In Germany, Europe’s economic power house, the unemployment rate hit a record low of 5.5% in December, underpinning a broad-based economic upswing.
European shares are expected to gain, with spread-betters looking to a higher opening of 0.6% in Germany’s Dax, 0.5% in France’s Cac 40 and 0.2% in Britain’s FTSE.
The world’s stock markets, which had their best year since 2009 last year, hit a record high on Thursday, extending gains so far this week to 1.4%.
On Wednesday, the three main stock indexes on Wall Street hit record closes on Wednesday, helped by a 1.5% rise in energy stocks.
Oil prices hovered at 2-1/2-year highs as the anti-government protests in Iran that began last week rattled Tehran’s clerical leadership and left 21 people dead so far, raising concerns about supply.
U.S. West Texas Intermediate (WTI) crude futures rose to as high as $62.17 per barrel, up 0.9% for the day and their highest level since mid-2015.
International benchmark Brent futures also scaled a 2-1/2-year high of $68.19 a barrel.
“Oil appears to be traded at a premium compared to economic fundamentals because of concerns over development in Iran,” said Motofumi Okoshi, senior economist at Nomura Securities.
At the moment, forward contracts are trading cheaper than expected spot prices, a condition known as backwardation, suggesting investors expect any supply shortages to be temporary.
“If conditions in Iran deteriorate further, I expect forward contracts will begin to be bought as well,” Okoshi added.
Concerns about geopolitical instability are also supporting safe-haven gold, which fetched $1,310 per ounce, after hitting a 3-1/2-month high of $1,321.5 on Wednesday.
Still, investors are expecting financial markets to be stable overall, with Cboe Volatility index, which measures implied price volatility of U.S. stocks in the next one month, closing at 9.15, just above record closing of 9.14 touched on Nov. 3, and below its 2017 average of 11.09.
