Asia shares up on hopes for China stimulus, Brexit vote awaited

Investors look at computer screens showing stock information at a brokerage house in Shanghai September 7, 2018. — Reuters pic
Investors look at computer screens showing stock information at a brokerage house in Shanghai September 7, 2018. — Reuters pic

TOKYO, Jan 15 — Asian stocks rose today, supported by a bounce in shares amid hopes for government stimulus, while sterling braced for the vote in parliament over the British government’s plan to exit the European Union.

The odds look stacked against Prime Minister Theresa May winning approval for her deal. Voting is expected to start about 1900 GMT today.

Spreadbetters expected European stocks to follow Asia’s lead and open higher, with Britain’s FTSE seen gaining 0.55 per cent, Germany’s DAX 0.7 per cent and France’s CAC 0.6 per cent.

MSCI’s broadest index of Asia- shares outside Japan recovered from early losses and advanced 1.3 per cent. South Korea’s Kospi hit a one-month high and Japan’s Nikkei added 1 per cent.

In , the CSI300 index of Shanghai and Shenzhen shares was up 1.7 per cent amid expectations of more government policy measures to prop-up a slowing economy.

China’s state planner said today it will aim to achieve “a good start” in the first quarter for the economy in a signal of more growth-boosting steps.

State television also quoted Chinese Premier Li Keqiang as saying the government is seeking to establish conditions helpful to meeting this year’s economic goals.

That came after data yesterday showed China’s exports unexpectedly fell the most in two years in December, while imports also contracted sharply.

Cyclical shares led the gains in Asia-Pacific, with Australian financial shares at their highest since early December while Japanese electronics and machinery makers shares rose to their best levels in six weeks.

“It is interesting that cyclicals are leading the gains today. It appears some contrarian investors are starting to buy cyclicals, looking beyond the last economic slowdown,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

“But I would suspect there will be heavy selling if we go up further, to around 2,650 in the S&P500 and 21,500 in the Nikkei,” Kuramochi added.

S&P500 e-mini futures gained 0.6 per cent in Asian trade.

In yesterday’s session on , the S&P 500 lost 0.53 per cent, with the biggest drag coming from a 0.9 per cent fall in technology sector.

US earnings season began on a positive note yesterday as Citigroup Inc beat profit estimates. The bank’s shares rose 4.0 per cent and bolstered the S&P financial sector, which rose 0.7 per cent.

Meaningful vote

The British pound was expected to steal the limelight later in the day as the Britain’s parliament votes on the proposed Brexit deal.

Yesterday, May urged lawmakers to take a “second look” at her deal, which lawmakers are expected to reject.

Such a result could produce a wide range of outcomes, from a disorderly exit from the union to a reversal of Brexit.

“Markets have priced in a rejection of May’s plan and there are many scenarios after that. Still I’d think the most likely outcome is to extend the (March 29) deadline of Brexit,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Indeed, currency option markets are barely pricing in the chances of sharp moves in sterling.

The pound’s one-month implied volatility stood at 12.625 per cent, above the average for the past year of around 8.8 per cent well off 20-per-cent plus levels seen in the days just before the UK referendum on June 23, 2016.

The pound changed hands at US$1.2909, up 0.3 per cent, having hit a two-month high of US$1.2930 on yesterday after a report, subsequently denied, that a pro-Brexit faction of lawmakers could support May’s deal.

The euro inched up 0.1 per cent to US$1.1480, consolidating after hitting a 12-week high of US$1.1570 touched on Thursday.

The gained 0.5 per cent on the yen to 108.685.

Oil prices also rebounded on supply cuts by producer club Opec and Russia.

International crude oil futures were at US$59.80 (RM244.68) per barrel, or 1.37 per cent from their last close.

US crude futures stood at US$51.22 per barrel, up 1.41 per cent. — Reuters

Source: The Malay Mail Online

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