Asia stocks hit 2-month high

Asia stocks hit 2-month high

Asian stocks hit a two-month high with investors betting the economy will start to recover.

Asian stocks hit a two-month high on Monday,with investors betting the global economy will start to recover later this year by shedding some of their big holdings of safe-haven government bonds.

The Australian dollar pushed to a three-month high against the US dollar as investors embraced higher-yielding currencies,taking heart from calmer financial markets and expectations for big government stimulus spending packages in coming weeks to revive growth.

Many market players are looking for a large US spending package and tax cuts to help support the world’s largest economy. US President-elect Barack Obama will meet later on Monday with senior Congressional leaders to discuss the plan.

“Risk aversion has eased in the last week and this has sent both the Dow and the Nikkei higher,” said Nagayuki Yamagishi,a strategist at Mitsubishi UFJ Securities in Tokyo.


“There’s quite a lot of expectations for the government of Obama and the policies he’s likely to enact,but when he actually takes office this mood may evaporate and a lot of problems still linger.”

Analysts believe the record drops that many stock markets suffered in 2008 have already gone a long way in anticipating the global economy’s slide into recession and the hit to corporate earnings that will be reported in coming months.

The MSCI index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS rose more than 1 per cent to a two-month peak,taking gains on the first two trading days of 2009 to nearly 3 per cent after a record 53 per cent plunge last year.

Japan’s Nikkei average .N225 gained 2.1 per cent to reach a two-month high in a half-day of trading,the first as markets re-opened after a string of New Year’s holidays.

A retreat in the yen helped lift exporters like Honda Motor,while a jump in commodity prices boosted shares of energy-related companies and trading houses. Mitsubishi Corp surged more than 9 per cent.

Oil prices climbed 91 cents a barrel to $47.25 as OPEC product cuts took effect and an Iranian military commander reportedly called for an oil boycott over Israel’s ground offensive in the Gaza Strip to counter militant rocket attacks.

Russia’s move to cut natural gas supplies to the Ukraine also showed signs of affecting Central European countries.

The dollar edged up across the board,mainly getting a boost as the euro stumbled. Traders said the single currency’s surge in December was due more to factors such as investors repatriating funds before year-end and was likely overdone.

The euro dropped 0.3 per cent to $1.3860. The dollar index,a gauge of its performance against six major currencies,was up 0.4 per cent at 81.799 .DXY and near a three-week high.

The Australian dollar climbed to its highest in almost three months at about $0.7160.