Broadgate: Market News 5/7
5 July 2013
Asian stocks rose on Friday, while sterling hit a five-week low, after two of Europe’s most important central banks surprised by assuring investors they were in no hurry to wind down stimulus.
But markets were cautious as they waited for the U.S. jobs report as it could bolster, or derail, the case for the Federal Reserve to start dialling down its asset-buying program this year. The report is due at 1230 GMT.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent.
Regional shares were broadly higher, with Australian shares climbing 0.7 percent, Hong Kong equities up 1.4 percent and Tokyo’s Nikkei average gaining 1.3 percent.
“The market has welcomed the policy responses that European central bankers made overnight,” said Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas in Tokyo. “It is bulk-buying of Nikkei futures that’s driving shares higher.”
South Korean shares slipped 0.2 percent, lagging behind their Asian peers as index heavyweight Samsung Electronics Co Ltd slid 3.7 percent after missing quarterly earnings forecasts.
“Samsung Electronics was an expected negative, yet the market is still responding sensitively to it. It is a big drag on the overall market today,” said Kim Young-june, a market analyst at SK Securities.
South Korean shares were still holding up fairly well, however, Kim said, adding that the ECB’s dovish stance had come as welcome news.
Breaking away from its tradition never to precommit on policy, the European Central Bank declared it would keep interest rates at record lows for an extended period and may even cut further. The Bank of England also cautioned investors they were being too quick to bet on higher UK rates.
Those comments on Thursday lit a fire under European stocks, which posted their biggest one-day jump in 11 months, while UK shares put on their best performance in 20 months.
Currency investors took the central banks’ guidance as a green light to sell the euro and sterling.
The pound hit a fresh five-week low of $1.5026 on Friday and last stood at $1.5045, down 0.2 percent on the day.
The euro slipped 0.1 percent to $1.2899, hovering near a five-week trough of $1.2883 set on Thursday.
“The unprecedented adoption of forward guidance by the ECB further increases the divergence in monetary policy versus the prospect of Fed tapering,” said Olivier Korber, strategist at Societe Generale.
“The topside risk in euro short rates and therefore in EUR/USD is drastically reduced for the year to come,” he wrote in a report, advising clients to keep short euro positions.
The firmer greenback weighed on some commodity prices that are priced in U.S. dollars. Copper fell 1.1 percent to $6,871.00 a tonne. U.S. crude was at $101.06 a barrel, down from a 14-month peak of $102.18 set on Wednesday.
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