INSUBCONTINENT EXCLUSIVE:
TOKYO: Asian stocks advanced on Friday as hints of progress in US-China trade talks and aggressive stimulus from the European Central Bank
helped counter worries about a global economic slowdown.
MSCI's broadest index of Asia-Pacific shares outside Japan ticked up 0.3 per cent
though mainland China and South Korea were closed for public holidays
Japan's Nikkei rose 1.0 per cent to four-month highs.
"Risk assets should find further support from accommodative policies, which are set to
remain in vogue for some time, and not just in Europe as seen in the global easing trend," said Esty Dwek, head of global market strategy at
Natixis in Geneva, Switzerland.
"Nonetheless, we believe that trade uncertainty and growth concerns will not vanish, so any reprieve on
either subject will be welcome
We also believe that some earnings growth will be needed for equities to grind higher," she said.
The United States on Thursday welcomed
China's renewed purchases of US farm goods while maintaining the threat of US tariff hikes as the world's two largest economies prepared for
talks aimed at breaking their trade war impasse.
Trump said he preferred a comprehensive trade deal with China but did not rule out the
possibility of an interim pact, even as he said an "easy" agreement would not be possible.
Investors bet optimism will prevail in the near
future though most economists in a new Reuters poll believed the trade dispute will worsen or at best stay the same over the coming
year.
The US S-P 500 closed within striking distance of its all-time closing high, rising 0.29 per cent to 3,009.57, near record closing
high of 3,024.50 marked in late July.
Philadelphia semiconductor shares index hit an all-time high while MSCI ACWI also came near this
year's high after seven straight days of gains by Thursday.
Sentiment found modest support from Trump's planned tax overhaul aimed at
middle-income households next year.
CENTRAL BANKSThe European Central Bank delivered bigger-than-expected stimulus, cutting interest rates
by 0.10 percentage point to minus 0.50 per cent, promising that rates would stay low for longer and restarting bond purchases of 20 billion
euros a month from November.
The resumption of quantitative easing had been seen as a close call and helped to boost risk assets.
But the
euro quickly lost steam and European bond yields also rose as profit-taking set in.
ECB President Mario Draghi stepped up his rhetoric in
calling for governments to spend their way out of a slowdown, highlighting the limitations of monetary policy and also fanning expectations
of fiscal spending down the road.
The euro stood at $1.10645, having risen 0.5 percent on Thursday and staying near two-week high of
$1.10875 hit in US trade.
Rising risk appetite pushed the yen down to six-week low of 106.265 to the dollar.
The 10-year German Bund yields
also rose back to minus 0.521 per cent.
That also helped to lift the yield on 10-year US Treasuries to as high as 1.801 percent, its highest
level since early August.
Fed funds rate futures price in an interest rate cut of 0.25 percentage point by the Fed next week but have
effectively priced out any chance of a larger cut.
The Fed will announce its policy on Wednesday, followed by the Bank of Japan (BOJ) on
Thursday.
Sources told Reuters the BOJ is leaning towards standing pat next week if markets are calm, but is brainstorming ways to deepen
negative interest rates at minimal cost.
"I think a rally in stock prices will run out of steam soon
It's typical buy-on-rumour-sell-on-fact trade on central bank stimulus and will be over by the Fed and the BOJ's meetings," said Tatsushi
Maeno, senior strategist at Okasan Asset Management.
"People also seem to think there will be a deal between China and the States soon but
you never know when suddenly Trump do about-face
We just saw that in May and August," he added.
Trump unveiled a hike in tariffs on $200 billion worth of Chinese imports in early May and
announced another 10 per cent tariff on the remaining $300 billion imports from China in early August
US stock prices were at record levels on both occasions.
Oil prices were on course to post weekly losses, on continued worries about
weakening demand and on speculation Trump may ease sanctions on Iran after his former national security advisor John Bolton, an Iran hawk,
left the White House earlier this week.
Brent crude futures fell 0.2 per cent to $60.28 a barrel while US West Texas Intermediate (WTI)
crude lost 0.2 per cent to $54.99