Asia buoyed by post-election Wall Street rally, US dollar bounces

Employees of a foreign exchange trading company work in front of monitors showing TV news market information in Tokyo November 7, 2018. — Reuters pic
Employees of a foreign exchange trading company work in front of monitors showing TV news market information in Tokyo November 7, 2018. — Reuters pic

TOKYO, Nov 8 — Asian stocks scaled a one-month peak today, after investors drove a rally on relief the US midterm elections delivered no major political surprises, while the bounced and pulled away from 2-1/2-week lows.

Spreadbetters expected European stocks to follow Asia higher at the open, with Britain’s FTSE seen adding 0.36 per cent, Germany’s DAX rising 0.55 per cent and France’s CAC climbing 0.45 per cent.

MSCI’s broadest index of Asia- shares outside Japan was last up 0.8 per cent to stand at its highest since October 8.

Hong Kong’s Hang Seng advanced 0.9 per cent and the Shanghai Composite Index climbed 0.2 per cent, receiving a mild lift from ’s stronger-than-expected October exports data.

Australian stocks rose 0.5 per cent, South Korea’s Kospi added 1.3 per cent and Japan’s Nikkei gained 1.8 per cent.

Wall Street’s main indexes rose more than 2 per cent yesterday, led by the technology and healthcare sectors as the market breathed a sigh of relief after the US midterm elections, in which Democrats wrested control of the House of Representatives and Republicans retained the Senate.

“Going forward, we think the removal of uncertainty and realisation of the expected outcome should be supportive for risk assets,” Goldman Sachs analysts said in a report.

While a divided Congress will make it harder for President Donald Trump to push through new legislation, such as additional tax cuts, investors do not expect a reversal of recently enacted tax cuts and deregulation.

“The key point after the midterm elections is that showed they had developed immunity towards higher yields. The last time long-term Treasury yields were at this level a month ago, they had helped trigger a major fall by stocks,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

“Steady US fundamentals will support this trend of equities and yields rising in tandem, which should also prop up the dollar in the longer term.”

The 10-year Treasury note yield rose to 3.25 per cent yesterday, its highest since October 9, with Wall Street’s rally reducing demand for safe-haven debt. It last stood at 3.23 per cent.

The US dollar index against a basket of six major currencies gained 0.2 per cent to 96.177, pulling back from 95.678 plumbed yesterday, its lowest since October 22.

That low for the greenback was driven by a knee-jerk reaction to the US midterm election results, with a divided Congress seen dulling Trump’s fiscal stimulus drive.

Some focus was also on the Federal Reserve’s monetary policy due later today. The Fed, however, is not expected to hike interest rates until its next gathering in December and analysts expected this meeting to have limited market impact.

The has tightened monetary policy three times in 2018, with the latest rate hike coming in September.

“A split Congress is unlikely to materially alter the Fed’s near-term hiking trajectory and the Fed will be biased to keep raising rates until the data or financial conditions turn,” strategists at Bank of Merrill Lynch wrote.

The euro was up 0.05 per cent at US$1.1432 after pulling back sharply from a high of US$1.1500 brushed earlier yesterday.

The US dollar was a shade higher at 113.62 yen and in striking distance of a one-month peak of 113.82 reached the previous day.

In commodities, US crude futures inched up 0.1 per cent to US$61.73 (RM257.23) a barrel after falling to an eight-month trough of US$61.20 yesterday.

crude dipped 0.08 per cent to US$72.01 a barrel following a loss of 1.4 per cent the previous day.

Oil prices struggled after surging US crude output hit another record and domestic inventories rose more than expected. — Reuters

Source: The Malay Mail Online

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