SYDNEY Asian shares hustled to one-month highs on Thursday after Wall Street strode to another record, while bonds rallied on wagers the European Central Bank would extend its stimulus campaign at a policy meeting later in the session.
Risk appetite got an extra boost when China reported upbeat trade figures with exports and imports both beating forecasts. Resource imports were very strong, a major reason prices for bulk commodities have been going gangbusters.
“The improvement reflects a strengthening in global demand, with recent business surveys suggesting that developed economies are on track to end the year on a strong note,” said Capital Economics’ Julian Evans-Pritchard.
The resource-heavy Australian market jumped 1.2 percent, as did MSCI’s broadest index of Asia-Pacific shares outside Japan.
An all time-peak for Samsung Electronics helped lift South Korea 1.2 percent. Japan’s Nikkei put on 0.9 percent, brushing off a disappointing downward revision to economic growth for the third quarter.
The bullish mood outweighed news that Moody’s had changed its outlook on Italy to negative, warning it may downgrade the credit rating if the country’s deteriorating economic and debt outlook was not reversed.
The euro took the move with aplomb, edging up to $1.0776 from an early trough of $1.0750. European bourses were also tipped to open firmer by spread betters.
Markets have been surprisingly buoyant in the wake of Italy’s “No” vote last weekend on a constitutional reform referendum, in part on hopes for continued support from the ECB which may widen the type of bonds it buys.
Also helping sentiment were reports Italy would step in to rescue troubled bank Monte dei Paschi, which lifted its shares by 9 percent.
All of which put downward pressure on yields of European peripheral debt, with buying spilling over to German bunds and U.S. Treasuries. Yields on 30-year Treasury debt fell by 6 basis points on Wednesday, the biggest daily decline since August.
That drop nudged the dollar down to 113.30 yen, while the dollar index dipped 0.2 percent.
Analysts also suspect the ECB may start preparing investors for an eventual tapering of its stimulus, which could underpin the euro even as the Federal Reserve prepares to raise U.S. interest rates next week.
The prospect of higher borrowing costs has certainly not fazed Wall Street, which hit fresh records on expectations the Trump administration will eventually deliver fiscal stimulus and deregulation.
“Investments and policies that have done well in a low-rate, low-growth world have reached their peak. Long-term winners could be supplanted in 2017,” said analysts at BofA Merrill Lynch in their year ahead outlook.
“Expect inflation rather than deflation; Main Street to prevail over Wall Street; fiscal winners to beat out zero-interest winners; and real assets to triumph over financial assets.”
The Dow ended Wednesday with gains of 1.55 percent, while the S&P 500 climbed 1.32 percent and the Nasdaq 1.14 percent.
In commodity markets, oil steadied after slipping on doubts that production cuts promised by OPEC and Russia would be deep enough to end a supply overhang. [O/R]
Brent futures were quoted up 1 cent at $53.01, while U.S. crude added 11 cents to stand at $49.88.
Commodities including iron ore and coking coal held recent hefty gains as Chinese demand drove steel prices to their highest since April 2014.
China’s imports of iron ore, crude oil, coal, soybeans and copper all surged in November, customs data showed.
(Reporting by Wayne Cole; Editing by Shri Navaratnam and Kim Coghill)