SHAFAQNA – Asian stocks hit a one-month high on Thursday as investors bet that more central bank stimulus in China and Europe would shore up the global economy, while oil prices tumbled to a four-year low as hopes for output cuts by OPEC faded.
MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.4 percent while Shanghai shares hit a three-year high, extending their rally after a surprise interest rate cut last week. They are up 8.2 percent so far this month.
“The rate cut clearly showed the Chinese authorities are very much keen to support the economy. So even though Chinese economic data has been pretty weak, investors are convinced that there will be no hard landing,” said Naoki Tashiro, the president of TS China Research.
Japan’s Nikkei shed 0.4 percent as the yen rebounded mildly but has gained 5.6 percent so far this month to become the second best performing market in the region after China following a surprise easing by the Bank of Japan at the end of October.
European shares rose on Wednesday, with Germany’s blue-chip DAX index advancing for the 10th straight session, its longest such streak in 18 months, as investors bet on further monetary stimulus from the European Central Bank.
“I expect a moderate (equities) rally to continue, perhaps led by European shares given signs of recovery there,” said Soichiro Monji, chief strategist at Daiwa SB Investments.
On Wall Street, stocks rose on Wednesday thanks to gains in tech shares, with the S&P 500 and Dow industrials closing at records despite disappointing U.S. economic data.
Durable good orders, a measure of business spending plans, fell for a second straight month, consumer spending rose less than expected and new home sales also unexpectedly fell.
A separate report from the Labor Department showed initial claims for state unemployment benefits rose above the 300,000 threshold last week for the first time since early September.
All of which helped to push down U.S. debt yields, with 10-year notes yield hitting a five-week low of 2.229 percent on Wednesday.
The dollar stepped back further from a 4-1/2-year peak against a basket of currencies hit on Monday. The dollar index stood at 87.682 versus Monday’s peak of 88.440.
The U.S. currency fetched 117.57 yen, off last week’s seven-year high of 118.98 yen while the euro traded at $1.2501, having extended its recovery from a low of $1.23595 on Monday.
Still, the common currency is likely to be hemmed in by expectations that the ECB could start buying sovereign debt just as some of the world’s major banks have done.
Vitor Constancio, the central bank’s vice president, said on Wednesday the ECB might decide to do so as early as the first quarter of next year, in the clearest indication yet from an ECB policymaker on the timing of any quantitative easing.
He also suggested the ECB is likely to buy government bonds broadly in proportion to the size of the euro zone’s 18 economies.
While many markets saw subdued trading on Thursday as U.S. financial markets are shut for Thanksgiving Day, oil markets were rattled after OPEC signaled that it would hold off making any major production cuts this week.
OPEC Gulf oil producers have reached a consensus not to cut oil output when OPEC meets on Thursday, a Gulf OPEC delegate told Reuters..
U.S. crudefutures fell 1 percent to $72.61 per barrel, their lowest since September 2010. Brent crude fell more than 1 percent to $76.73.