Inside Financial Markets



TOKYO, Oct 22 (Reuters) – Asian shares were on track for solid gains on Wednesday, after Wall Street’s strong performance on upbeat results from two technology bellwethers offset investors’ recent concerns about the outlook for the global economy.

MSCI’s broadest index of Asia-Pacific shares outside Japan  .MIAPJ0000PUS extended gains and was up 0.9 percent, while Japan’s Nikkei stock average .N225 added 1.7 percent, rebounding from Tuesday’s 2 percent drop.

Asian sentiment also got a lift from the European Central Bank’s plan to buy corporate bonds, a step that would help banks free up more of their balance sheets for lending. The ECB might decide on the matter as soon as December with a view to begin purchases early next year, several sources familiar with the situation told Reuters. (Full Story)

“The news triggered bargain-hunting as Japanese shares have fallen to levels which priced in the worst case scenario,” said Toru Ibayashi, executive director at UBS Wealth Management, referring to fears that Europe’s economy would fall back into recession.

In U.S. trading, shares of Apple Inc  AAPL.O and Texas Instruments Inc  TXN.O gained on stronger-than-expected quarterly earnings, lifting the tech-heavy Nasdaq Composite index  .IXIC more than 2 percent. The S&P 500  .SPX added 1.96 percent to mark its biggest daily percentage gain since October 2013 and its fourth straight rising session.

Japanese trade data released early Wednesday underpinned buying in Tokyo, as it showed Japan’s exports rose 6.9 percent in September from a year earlier, the fastest pace in seven months, a tentative sign that external demand is starting to pick up. (Full Story)

The upbeat mood in global equities markets sapped the safe-haven appeal of U.S. Treasuries, pushing their yields away from last week’s 17-month lows. The yield on benchmark 10-year U.S. Treasury notes  US10YT=RR stood at 2.209 percent in Asian trade, steady from Tuesday’s U.S. close of 2.208 percent.

Data on Tuesday showing a stronger-than-expected 2.4 percent rise in U.S. domestic home resales last month provided evidence that the U.S. economic recovery maintained momentum and also put upward pressure on yields. (Full Story)

Higher U.S. yields supported bolster the greenback, with the dollar index  .DXY steady on the day at 85.278.

“Given heightened concern about falling inflation expectations, attention turns to the U.S. September CPI report,” strategists at Barclays said. “Our thesis of USD outperformance driven by relative U.S. strength and interest rate divergence remains intact, but is at risk of delay pending soft underlying inflation trends.”

The CPI report is due at 1230 GMT. Economists expect annual core CPI inflation to stay flat at 1.7 percent in September, and a cooler reading would add to speculation that the Federal Reserve will wait longer before raising U.S. interest rates.

The consensus view is that the U.S. central bank will decide to wrap up its asset purchases under its third round of quantitative easing later this month at its Oct 28-29 policy meeting, though short-term interest rates futures implied markets do not expect the Fed to hike rates until late 2015.

The dollar inched lower on the day against the yen  JPY= to 106.84 yen, while the euro  EUR= nursed its losses after dropping on the ECB news, and edged slightly higher to $1.2728.

In commodities markets, Brent crude  LCOc1 added about 0.1 percent to $86.30 a barrel after posting solid gains on Tuesday, helped by data showing stronger-than-expected China demand and some technical price recovery after weeks of almost uninterrupted selling.

Spot gold  XAU= was steady on the day at $1,248.75, not far from a six-week high marked in the previous session.


Sanie Khan

Sanie Khan holds a deep knowledge of the financial markets in Pakistan. Based in Karachi, he has over 20 years of hands-on management experience in financial technologies and managing operations in the financial sector. He was the General Manager at the Pakistan Stock Exchange (PSX) for 17 years. He along-with senior members of Exchange

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)