Asian Shares Rise, China Markets Closed for Holiday 

Asian-Market

U.S. markets regained some footing overnight

Asian markets were mostly higher on Thursday, led by a strong performance in Japanese stocks after U.S. markets restored some stability to a region rocked by volatility.

Japan’s Nikkei was 1.5% higher at around midday, at 18,366.15, helped by a weaker yen. South Korea’s Kospi was up 0.3% and Malaysia’s main index was up 0.9%. Markets in China and Hong Kong are closed Thursday for a national holiday.

Preliminary data showed overnight that U.S. private-sector jobs expanded at a modest pace in August. This is moderating somewhat the flight to haven assets—mainly U.S. Treasurys and the Japanese yen—that happened Tuesday following the release of disappointing Chinese manufacturing statistics.

A Federal Reserve report also provided evidence that some workers are starting to see pay increases. This pushed up the Dow Jones Industrial Average 1.8% overnight in U.S. markets.

“With U.S. stocks rebounding 1.8%, and mild gains from European markets, we could see some wind keeping Asian equities airborne today. Without China to provide guidance, improved sentiments from the Street would provide trading clues for Asian investors,” said IG market strategist Bernard Aw. “I expect the cautious undercurrent to dictate trade in Asia today,” he said.

Still, some question the sustainability of the rebound amid entrenched concerns about a Chinese economic deceleration that has clouded the outlook for Asian economies, markets and currencies.

“China risk is still there,” said Yoshihiro Okumura, general manager of research at Chibagin Asset Management.

Stock gains in Japan early Thursday morning were led by companies catering to domestic demand. Such stocks are typically in favor in Japan during selloffs. Pharmaceutical firmDaiichi Sankyo Co. was up 3.8%. Food company Ajinomoto Co. was 2.7% higher.

Elsewhere in Asia, Singapore’s FTSE Straits Times Index was up 0.8% at 2901.67, while Indonesia’s benchmark stock index gained 0.4%. Australia’s ASX was 0.4% lower.

The next key indicator for many investors is the release of a more comprehensive U.S. jobs report which is expected Friday. The report, an important measure of the health of the U.S. economy, may provide vital clues about whether the U.S. Federal Reserve will raise interest rates in September, as many investors have long expected.

Until recently, traders widely expected the Fed to raise rates at its September meeting. Weak inflation and low wage growth in the U.S., however, have undermined the case for a rate rise, and now the central bank has to consider a global stocks selloff that began in mid-August, triggered by China’s move to let the yuan weaken and concerns about the health of its economy.

“The slowdown of the Chinese economy, the devaluation of the yuan against the U.S. dollar, and the world-wide decline in commodity prices could further delay the return of U.S. inflation to its 2% target. This makes a September rate hike by the Fed decreasingly likely,” Rabobank said in a note.

The U.S. dollar, which has risen over the past several months against most Asian currencies in anticipation of a September rate increase, extended gains during Thursday morning trade. The Japanese yen touched 120.55 at around midday as stocks gained, falling 0.2% against the U.S. dollar. A weaker yen usually bodes well for Japanese exporters, which then pay lower costs at home.

The Malaysian ringgit continued its downward spiral against the U.S. dollar, dropping another 0.4% to 4.22. Concerns about the impact of falling commodity prices have hurt the outlook for the commodities-intensive economy of Malaysia, taking down the ringgit, which hit a 17-year low of 4.295 against the dollar last week.

The Australian dollar strengthened after weakening slightly in the morning, gaining 0.3% to 0.701 against the U.S. dollar and stabilizing somewhat after hitting its lowest level Wednesday since 2009. This after data showed Australia’s economy missed growth projections in the second quarter.

Brent crude oil, which slumped sharply during Tuesday trade, extended losses by another 0.3%, to trade to US$50.33 a barrel.

Source: WSJ – Asian Shares Rise, China Markets Closed for Holiday

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