Asian Markets Up on Hopes for Fed Stimulus
Asian markets climbed Wednesday on hopes for a fresh stimulus drive by the US Federal Reserve to kick-start its economy while G20 leaders pledged to “restore confidence” in the world economy.
European heads at the G20 summit in Mexico also vowed to begin looking at a region-wide banking union as they attempted to soothe investor concerns over the debt-riddled eurozone.
Tokyo rose 0.77 percent by the break, Hong Kong was 0.50 percent higher, Sydney added 0.55 percent, Seoul gained 0.31 percent and Shanghai was flat.
Eyes are on Washington, where the Fed will wrap up a two-day meeting that many expect to end with a fresh injection of capital to shore up the sputtering economic recovery as jobs growth slows.
Some economists say policymakers could use a third round of asset purchases known as quantitative easing (QE3) or use other tools at their disposal.
“Hopes for more easing are certainly a factor stoking enthusiasm for equities globally,” Tatsunori Kawai, chief strategist at kabu.com Securities, told Dow Jones Newswires.
“But conversely, the resulting pressure on the dollar may end up holding yen weakening — a critical consideration for Japan exporter shares — at bay.”
In early Asian trade, the dollar was quoted at 79.06 yen, slightly up from 78.89 yen in New York late Tuesday.
On Wall Street the Dow rose 0.75 percent, the S&P 500 climbed 0.98 percent and the Nasdaq added 1.19 percent.
In the Mexican resort of Los Cabos, European leaders scrambled to buy themselves time in the battle to save the eurozone, promising their G20 partners they would integrate their banking sector and restart growth.
In a joint communique the heads of the 20 biggest developed and developing economies pledged to “take the necessary actions to strengthen global growth and restore confidence.”
And the heads of Europe’s major economies agreed “to consider concrete steps towards a more integrated financial architecture, encompassing banking supervision, resolution and recapitalization, and deposit insurance.”
The leaders said eurozone members will “take all necessary measures” to stabilise the single currency, including moves to break the loop that has weak governments piling on more and more debt to bail out their banks.
The meeting looked to calm markets that have been rattled by Europe’s struggling banking system, especially that of Spain, which this month was promised up to $125 billion to help troubled lenders.
Looking ahead to next week’s European summit, when a more concrete action plan is expected to emerge, International Monetary Fund managing director Christine Lagarde said: “In Los Cabos the seeds of a pan-European recovery plan were planted.”
The summit took place against a backdrop of soaring borrowing costs for Madrid, which saw the yield on its 10–year bonds surge to a record 7.13 percent Monday, which is considered unsustainable, although they eased to 6.99 percent Tuesday.
Also on Tuesday, Spain’s Treasury succeeded in raising 3.04 billion euros ($3.8 billion) at an auction, beating its 2.0-3.0-billion-euro target for 12- and 18-month notes.
Although it still had to pay sky-high rates — 5.074 percent for 12-month debt and 5.107 percent for 18-month debt — the result was seen as a moderate success.
On Europe’s markets London’s benchmark FTSE 100 rose 1.73 percent, Frankfurt’s DAX 30 rallied 1.84 percent and the Paris CAC 40 gained 1.69 percent.
In Madrid, the IBEX–35 climbed 2.67 percent and Milan’s FTSE Mib soared 3.35 percent.
In Tokyo currency trade, the euro slipped to $1.2676 from $1.2688 while also dipping to 99.96 yen from 100.16 yen.
On oil markets New York’s main contract, light sweet crude for delivery in July, fell 23 cents to $83.80 a barrel and Brent North Sea crude for August delivery shed 25 cents to $95.51.
Gold was $1,620.15 an ounce at 0320 GMT, compared with $1,630.77 late Tuesday.