Early investors review: Asian equities built on the best start to a year since 2006 

Asian equities built on the best start to a year since 2006 as Japanese traders returned from a holiday following new all-time highs for U.S. shares. The yen climbed in an apparent reaction to the Bank of Japan trimming bond purchases in one of its regular operations.

Japanese shares pared their gains after the yen’s advance in wake of the announcement by the BOJ, which made a small tweak to its buying of longer-dated debt. While a number of analysts do anticipate the central bank to tweak its stimulus program this year, Governor Haruhiko Kuroda has repeatedly emphasized there’s no shift on the immediate horizon.

Shares from Sydney to Hong Kong were modestly higher after the S&P 500 Index eked out a fresh closing high. Declines at Samsung Electronics Co. in wake of its profit announcement weighed on South Korea’s equity index. Earnings will continue to be a focus as the week goes on, with financial firms including JPMorgan Chase & Co. and Wells Fargo & Co. on the schedule. The dollar’s softness last year may reverberate for some, as it did negatively for Samsung.

The yen rose 0.4 percent against the dollar after the BOJ cut its purchases of government bonds maturing in more than 10 years by 10 billion yen ($88 million) compared with operations last month.

Signs of financial-market stress continue to abate at the start of 2018 amid optimism that lower U.S. taxes and a broadening global economic recovery justify record high prices for global equities. In Europe, data showed confidence in the euro area continued its advance at the end of 2017. At the same time, the euro has been restrained by concerns about Germany’s continued struggle to form a government.

“This environment of strong global growth and contained inflation is actually a great environment for Asian equities, including tech,” said Ajay Kapur, head of Asia Pacific and global emerging market strategy at Bank of America Merrill Lynch in Hong Kong, in an interview with Bloomberg TV. “On the margin you will get hurt a little bit on the currency,” as seen with Samsung, but demand for tech companies’ products remains good, he said.

Here are some of the other main events to watch for this week:

• Australian retails sales numbers are due on Thursday.
• U.S. inflation data are forecast to show price pressures remain muted, giving hawks little reason to argue for faster tightening.
• St. Louis Fed bank President James Bullard and head of the New York Fed Bill Dudley are among central bankers scheduled to speak.
• China producer and consumer prices data come Wednesday, while a reading on the country’s money supply is expected in coming days.
• Talks between South Korea and North Korea are set to take place Tuesday.

These are the main moves in markets:

Stocks

• Japan’s Topix index rose 0.4 percent as of 2:55 p.m. in Tokyo, paring earlier gains as of much as 0.8 percent.
• Futures on the S&P 500 Index slid 0.1 percent after the underlying gauge rose 0.2 percent Monday.
• The MSCI Asia Pacific Index climbed 0.3 percent and is up 3.8 percent since the year began.
• Hong Kong’s Hang Seng Index rose 0.3 percent in 11th straight day of gain, the longest streak since 1999. South Korea’s Kospi reversed gains.

Currencies

• The yen rose 0.4 percent to 112.68 per dollar.
• The euro was at $1.1966 after sinking 0.5 percent Monday.
• The Bloomberg Dollar Spot Index slid 0.1 percent after jumping 0.3 percent Monday for the biggest increase in more than three weeks.
• The pound traded at $1.3573.

Bonds

• The yield on 10-year Treasuries held at 2.48 percent in early trading Tuesday.
• Australia’s 10-year yield was up about two basis points to 2.67 percent.

Commodities

• Gold futures were little changed at $1,319.72 an ounce.
• West Texas Intermediate crude rose 0.8 percent to $62.19 a barrel.

Source: Bloomberg – Asia Stocks Build on Record High, Yen Strengthens: Markets Wrap

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