Inside Financial Markets

Asian Stocks Extend U.S. Bounce as Fed Boosts Dollar

Pedestrians walk past an electronic board showing various stock prices outside a brokerage in TokyoAsian Stocks Extend U.S. Bounce as Fed Boosts Dollar; Oil Climbs

Japanese shares drove gains in Asia amid better-than-estimated company earnings. The dollar extended its advance after the Federal Reserve said the job market is improving, while oil advanced.

The MSCI Asia Pacific Index added 0.4 percent by 12:58 p.m. in Tokyo, heading for a second day of gains. Japan’s Topix index jumped 1.1 percent with Nintendo Co. surging 8 percent. The U.S. dollar gained 0.8 percent against the Korean won and 0.2 percent against the yen. U.S. index futures slipped 0.2 percent after stocks climbed Wednesday. A surprise drop in U.S. supplies sent oil higher.

Investors will get another chance to speculate on the timing for U.S. rate hikes with an update on second-quarter gross domestic product due Thursday. While calling gains in the labor market “solid” in its post-meeting statement Wednesday, the Fed kept traders guessing on the precise timing for policy tightening. More than 500 companies in Japan’s Topix index report first-quarter earnings on Thursday and Friday.

 “The Fed statement was similar to the last and it was a very modest upgrade to previous language,” Raiko Shareef, a markets strategist at Bank of New Zealand Ltd., said by phone from Wellington. “That will make the two following employment reports we get more important, and strong results would support our view of a September liftoff.”

The Topix headed for a second day of gains as the yen traded at a one-week low versus the dollar. Of the companies on the index that have posted results already, and for which Bloomberg has estimates, 60 percent beat analysts’ expectations for profit. Japan’s industrial production increased more than forecast in June, aiding an economy that struggled last quarter with weakness in retail sales and exports.

‘Some Further Improvement’

Australia’s S&P/ASX 200 Index climbed 0.3 percent. South Korea’s Kospi index fell 0.6 percent amid a 3.4 percent retreat by Samsung Electronics Co. after second-quarter profit missed analysts’ estimates and a 5.1 percent slump by SK Hynix Inc.

The Fed dropped the modifier “somewhat” in describing a decline in labor-market slack, and said it will tighten policy once it sees “some further improvement in the labor market.” The addition of the word “some” to this sentence is a strong indicator that the U.S. is inching closer toward its first rate increase since 2006, Alan Ruskin, global head of Group of 10 foreign exchange at Deutsche Bank AG, said in an e-mail.

Fed Chair Janet Yellen is guiding the central bank toward its first rate increase in almost a decade as the U.S. approaches full employment. She has said the Fed is likely to tighten policy this year should the economy continue to improve in line with her expectations. Economists have put the chance of a September increase at 50 percent.

Goldman Positive

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, rose 0.1 percent, extending Wednesday’s 0.3 percent advance. Treasuries slipped a third day, with 10-year yields up three basis points, or 0.03 percentage point, to 2.31 percent.

Goldman Sachs Group Inc. Chief Executive Officer Lloyd C. Blankfein said Wednesday that U.S. markets are poised for prolonged growth and will quickly move on after the jolt that should result from the Fed’s rate increase.

West Texas Intermediate trimmed its biggest monthly drop this year as U.S. crude production slipped and stockpiles unexpectedly declined. Oil in New York added 0.2 percent to $48.90 a barrel, while Brent crude increased 0.5 percent. U.S. inventories decreased by 4.2 million barrels to 459.7 million through July 24, government data showed, compared with a forecast in a Bloomberg survey for supplies to increase by 850,000 barrels.

The Bloomberg Commodity Index of 22 raw materials gained 0.1 percent, advancing for a third day to trim its biggest monthly loss since 2011

Ahsan Baig

The Canadian Securities Institute


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