Asian markets staged a much-needed rally yesterday as investors tracked Wall Street’s best performance in more than six months thanks to a healthy round of earnings reports.
Bargain-buyers took advantage of the strong readings from some of the world’s top firms to step back into the mix, with a dip in US Treasury yields and Washington’s announcement of trade talks with Japan, the EU and Britain helping sentiment.
The news helped distract from long-running worries about the US-China trade war which shows no sign of abating.
Investors are now awaiting the release later in the day of minutes from the Federal Reserve’s most recent policy meeting, hoping for some insight into its plans for interest rates in light of fresh strong data on the US economy. All three main indexes in New York piled on more than 2% on Tuesday, the best daily performance since March, in response to a string of positive results from the likes of Netflix, Goldman Sachs, Johnson & Johnson and UnitedHealth Group.
And the gains filtered through to Asia, where Tokyo ended 1.3% higher thanks to a pick-up in the dollar against the yen, while Shanghai gained 0.6%. Sydney, Seoul, Singapore, Wellington and Manila each put on more than 1%. Hong Kong was closed for a public holiday.
In early European trade London rose 0.4%, while Frankfurt and Paris both added 0.3%.
“The earnings that came through overnight definitely is something the market has been waiting for to really change the sentiment,” IG Asia market strategist Jingyi Pan told Bloomberg TV.
But Stephen Innes, head of Asia-Pacific trade at OANDA, said: “Perhaps a bit surprising is that local equity markets are not exactly knocking it out of the park this morning.
“I suspected they would take their lead from the US equity froth. But again, local dealers remain a better seller of risk until a definitive shift in US-China trade tensions is offered up.”
On currency markets the dollar was down against most high-yield and emerging market economies as traders came out of their shells after recent selling.
Ray Attrill, head of forex strategy at National Australia Bank, suggested US President Donald Trump’s latest outburst against the Fed’s rate hikes, which he claims are excessive, were weighing on the dollar.
“While such name calling shouldn’t mean anything in terms of what the Fed actually does, it is a factor which somewhat undermines sentiment towards the dollar,” he said. “We’d argue, (it) is a contributory factor, albeit minor, to recent poor performance of the US dollar in the face of first higher US yields, then last week’s sharp turn for the worse in US equity market.”
Oil prices edge up after data showed a drop in US stockpiles but investors are also keeping an eye on Riyadh, with major producer Saudi Arabia under pressure over the disappearance of journalist Jamal Khashoggi.
The issue has strained relations between the Saudis and other countries, with Turkish claims he has been killed leading to a wave of cancellations among big companies who had been scheduled to appear at a business conference in Riyadh next week.
In Tokyo, the Nikkei 225 closed up 1.3% to 22,841.12 points and Shanghai — Composite ended up 0.6% to 2,561.61 points. Hong Kong market was closed for a public holiday.
Employees work at the Tokyo Stock Exchange (file). The Nikkei 225 closed up 1.3% to 22,841.12 points yesterday.
