Asian shares hit 6-1/2-month high on tech hopes, U.S. data
Asian shares hit 6-1/2-month highs on Friday after upbeat U.S. data and optimism in the tech sector lifted Wall Street stocks, helping calm some of the jitters sparked by the Federal Reserve’s cautious outlook on the world’s biggest economy.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3 per cent led by 0.5 per cent gains in the info tech sector, while Japan’s Nikkei bucked the trend and lost 0.2 per cent.
On Wall Street, the S&P 500 gained 1.09 per cent, while the Nasdaq Composite rallied 1.42 per cent, both hitting five-month highs.
Apple Inc led the tech sector’s advance, rising 3.7 per cent ahead of the company’s expected streaming service debut next week.
The Philadelphia SE Semiconductor Index soared 3.5 per cent, coming within a striking distance from its all-time high marked about a year ago.
“I’d think optimism in the tech sector is the biggest driver now. It reflects expectations that the U.S. and China will eventually reach a trade deal,” said Soichiro Monji, senior economist at Daiwa SB Investments.
A U.S. trade delegation headed by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will visit China on March 28-29, which will be followed by a trip by Chinese Vice Premier Liu He to Washington in early April.
Thursday’s U.S. economic data was also upbeat as initial claims for jobless benefits fell more than expected and mid-Atlantic factory activity rebounded sharply.
The figures mollified worries about the U.S. economic outlook after the Fed on Wednesday surprised investors by adopting a sharp dovish stance, anticipating no further interest rate hikes this year and ending its balance sheet roll offs.
The dollar also jumped back with its index against a basket of six major currencies rising to 96.327 from Wednesday’s 1-1/2-month low of 95.735.
The euro traded at 1.1374 dollar, flat on the day and off Wednesday’s 1-1/2-month high of 1.14485 dollar.
The dollar stood at 110.74 yen, having hit a five-week low of 110.30 on Thursday.
The benchmark U.S. 10-year notes yield stood at 2.530 per cent after having slipped to as low as 2.500 per cent on Thursday, its lowest since early January last year.
The five-year yield dropped to 2.34 per cent, below the current Fed funds rate around 2.40 per cent, as fed funds rate futures price in about 50 per cent chances of a rate cut this year.
“The main market reaction to the Fed’s announcement was that it has become a consensus that the Fed’s next move is a rate cut,” said Naoya Oshikubo, senior manager at Sumitomo Mitsui Trust Asset.
“As economic data from China and elsewhere has not bottomed out yet, investors will be looking at economic fundamentals for now. If there are improvements, then markets could roll back expectations of a Fed rate cut,” he said.
DoubleLine Capital’s chief executive Jeffrey Gundlach, known as the “Bond King,” said on Thursday that the stock market “likes the fact that they (the Fed) aren’t going to give them any problems,” for now.
He added, however, the Fed’s cautious stance on raising rates could backfire by creating uncertainty in the economy and hurt the U.S. central bank’s credibility.
Another cloud hanging over markets was Britain’s fraught moves to exit from the European Union, as the British pound was bruised anew by rising worries about a no-deal Brexit.
EU leaders said Britain could leave the European Union without a deal on April 12 if lawmakers fail next week to back Prime Minister Theresa May’s agreement with Brussels.
EU leaders gave May an extra two months, until May 22, to leave if she wins next week’s vote in parliament.
The pound traded at 1.3136 dollar, having dropped to 1.3004 dollar the previous day. Against the euro, it hit one-month low of 0.8722 to euro on Thursday and last stood at 0.8664.
Oil dipped, but held near 2019 highs reached the previous day, supported by a broad risk-on mood, OPEC production cuts and U.S. sanctions on key producers Iran and Venezuela.
Brent crude oil futures edged down 0.3 per cent to 67.65 dollars per barrel, while U.S. crude futures fell 0.3 per cent to 59.81 dollars.