TOKYO, June 7 2018 : Asian shares rose to 2 1/2-month high today, supported by strong economic fundamentals, while expectations the European Central Bank could start to wind down its stimulus boosted the euro and global bond yields.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2 percent to extend its gains, hitting a 2-1/2 month high for a second straight day.Japan’s Nikkei average .N225 rose 0.7 percent to 22790.68 in early trade.
The euro EUR= rose to a two-week high, while the 10-year U.S. Treasury yield hit a 1-1/2-week peak yesterday, after officials said the European Central Bank could wind down its stimulus program by the end of the year.
Robust growth is making the central bank increasingly confident that inflation is on its way back to target, ECB chief economist Peter Praet said on Wednesday, raising the likelihood it may use a meeting next week to reveal more about the end of its bond-buying program.
Worries over the effects of reduced ECB bond buying triggered a broad sell-off in German Bunds and other European government debt, which spilled over to Treasuries, analysts said.
Higher yields helped to lift S&P 500 financials, which rose 1.8 percent and were the biggest percentage gainer among S&P 500 sectors.
“The U.S. 10 year Treasury yield rose alongside its eurozone peers overnight, while U.S. stocks rallied, reflecting a risk-on attitude among investors,” said Makoto Noji, senior FX/bond strategist at SMBC Nikko Securities.
White House economic adviser Larry Kudlow said late on Wednesday that U.S. President Donald Trump will meet French President Emmanuel Macron and Canadian Prime Minister Justin Trudeau at the G7 summit this week.
Although Kudlow said Trump would not back down from the tough line he has taken on trade, the comments appeared to calm investors.
The Dow Jones Industrial Average .DJI rose 1.4 percent to 25,146.39, the S&P 500 .SPX gained 0.86 percent to 2,772.35 and the Nasdaq Composite .IXIC added 0.67 percent to hit its record closing high of 7,689.24.
Oil prices fell on fears of rising global supply after U.S. inventories rose unexpectedly and Saudi Arabia and other big producers signaled they may raise production.
U.S. light crude settled 1.2 percent lower at $64.73 a barrel yesterday. The prices have bounced back since, with the WTI gaining 0.7 percent to $65.15.
India’s central bank (RBI) raised its policy rate for the first time in more than four years yesterday, but surprised some economists by keeping its stance “neutral” instead of changing it to “tighten”.
Market participants also eyed the G7 summit later this week and U.S.-North Korea summit scheduled for next week. – Reuters