Asian shares hopped higher on Thursday after Wall Street strode to new records and bonds rallied on wagers the European Central Bank would extend its asset buying campaign at a policy meeting later in the session. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.8 percent to a one-month top, while Australia jumped 1.3 per cent helped by rising resource prices.
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Japan’s Nikkei put on 1 per cent, brushing off a disappointing downward revision to economic growth for the third quarter. Sentiment also seemed little troubled after Moody’s changed its outlook on Italy to negative, warning it may downgrade the credit rating if the country’s deteriorating economic and debt outlook was not reversed.
The euro took the news relatively well, easing just a touch to $1.0756, from a top of $1.7068.
Markets have been surprisingly buoyant in the wake of Italy’s “No” vote last weekend, in part on hopes for continued support from the ECB which may widen the type of bonds it buys. Also helping sentiment were reports Italy would step in to rescue troubled bank Monte dei Paschi, which lifted its shares by 9 per cent.
All of which helped drive down yields on European peripheral debt, with buying spilling over to German bunds and US Treasuries. Yields on the 30-year Treasury fell by almost 6 basis points in the biggest daily decline since later August. That drop nudged the dollar down a touch to 113.73 yen while the dollar index dipped 0.05 per cent.
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Analysts also suspect the ECB may start preparing investors for an eventual tapering of its stimulus, which could underpin the euro even as the Federal Reserve prepares to raise U.S. interest rates next week. The prospect of higher borrowing costs has certainly not fazed Wall Street, which notched fresh records on expectations the Trump Administration will eventually deliver fiscal stimulus and deregulation. The Dow ended Wednesday with gains of 1.55 percent, while the S&P 500 climbed 1.32 percent and the Nasdaq 1.14 percent.
Transport stocks had a barnstorming session with the sector jumping 2.5 percent to an all-time intraday peak. But biotechnology and pharmaceutical stocks slid after Trump promised in a Time magazine interview that “I’m going to bring down drug prices.”
In commodity markets, oil steadied after slipping on doubts that production cuts promised by OPEC and Russia would be deep enough to end a supply overhang.
Brent futures were quoted up 13 cents at $53.13, recouping a little of Wednesday’s losses. U.S. crude added 26 cents to stand at $50.03.
Bulk commodities extended their bull run with iron ore and coking coal surging as Chinese demand drove steel prices to their highest since April 2014.