Asian shares recover on record Dow close: US data

Reuters: Asian shares edged higher on Friday, shrugging off three days of losses as new US data suggested a steady recovery in the world’s largest economy, bolstering investors’ risk appetite.

Japan’s Nikkei stock average was among the regional out performers, climbing 0.8% to a new 4½-year peak after the Parliament approved Haruhiko Kuroda as the next Governor of the Bank of Japan and his two new deputies.

Markets are expecting the BOJ to take more aggressive policy easing measures as soon as its next scheduled policy meeting on 3 and 4 April.

“We see several signs of a little bit of overheating in the Japanese market, but strength in the overseas market serves as a tailwind to Japanese equities,” SMBC Nikko Securities assistant general manager Hiroichi Nishi said.

Expectations that the new BOJ leadership will take more aggressive monetary easing policies sought by Prime Minister Shinzo Abe as part of his economic revival plan have driven Yen selling and share buying for the past four months.

Some market observers say the premiums based on such expectations are now fully priced in to the Dollar, which may be topping out against the Yen, as seen in risk reversals or put and call options flipping toward bets that the yen will rise.

“As the actual BOJ meeting approaches, some people are getting scared,” Mizuho Corporate Bank in Tokyo market economist Daisuke Karakama said, adding Kuroda may run out of new policy options in the next three to four meetings and may revert to conventional buying of government bonds.

“Fundamental supply/demand related reasons justified selling the Yen down to 90, but the additional five to six Yen to current levels is purely due to the Abe premiums.

Now, it’s a tug-of-war with the Japan-specific Yen selling and the Dollar buying based on the strength of the US economy,” Karakama said.

The Dollar was trading at 96.10 Yen, nearing Tuesday’s high of 96.71 Yen, its peak since August 2009.

The MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.3% after falling in the past three sessions as investors took profits from regional rallies that took some indexes to record peaks or multi-year highs.

The Dow Jones industrial average once again closed at a record high, rising for a 10th straight day on Thursday for its longest winning streak since 1996, while the Standard and Poor’s 500 Index closed less than two points from an all-time closing high of 1,565.15 set in October 2007.

European shares surged to fresh 4½-year peaks on Thursday, on upbeat corporate updates and lower-than expected weekly the US jobless claims.

Other data which showed a lack of broad price pressures left scope for the US Federal Reserve to keep in place the very accommodative monetary policy that has helped support asset prices around the world.

Australian shares led the gains in the Asian-Pacific region with a 1.1% jump, as the stellar performance in the US stocks boosted financial stocks.

“I’m not really worried about serious pullbacks, just because I think earnings are looking better,” Deutsche Bank, of Australian shares equities strategist Tim Baker said.

The Australian Dollar, often used as a gauge for investor risk appetite, was at US$ 1.0370, not far from Thursday’s five-week high touched after a strong local employment data reduced the chances for a rate cut by the Reserve Bank of Australia.

South Korean shares underperformed with a 0.6% drop, as heavyweight Samsung Electronics slipped after the launch of its new smartphone, but losses were plugged by the rebound of auto shares, which were buoyed by a weaker won.

The Dollar index stood at 82.537 but stayed close to its seven-month high of 83.166 touched on Thursday.

“With the US Dollar converting from a funding towards an asset currency, we would expect bullish emerging markets trades to be funded in low-cost, fundamentally weak G10 currencies,” such as the Yen, the Euro and sterling, Morgan Stanley said in a research note.

“The global economy has remained on a strong reflation course. Countries that are seeing their economies do better are allowing their currencies to appreciate,” and their strengthening demand conditions should benefit other economies, which is risk-positive, Morgan Stanley said.

Crude oil was up 0.2% to US$ 93.22 a barrel while Brent rose 0.4% to US$ 109.39.

London copper gained 0.4% to US$ 7,827 a tonne and was set to close higher for a second straight week after the latest sign of a recovery in the global economy, but muted buying from top consumer China curbed upside momentum.