US Stock Rally Extends to Asia; Euro Hits Year-High

Asian stocks followed a rebound in the U.S. as investors bet the global economy can withstand tighter financial conditions as growth picks up. The euro rose to the highest level in a year while oil continued to climb.

Banks and technology shares led gains in the MSCI Asia Pacific Index, after the S&P 500 Index rebounded from the biggest selloff in six weeks. The dollar slid against most major currencies, with the pound building on recent gains as Bank of England chief Mark Carney said rates may need to rise soon. Oil advanced for a sixth straight session.

Global equities are poised to close out their best start to a year since 1998, up 11 percent and trading at an all-time high. Investors are putting their faith in the robustness of earnings as the economy continues its recovery, shrugging off a swath of worries from oil’s slump into a bear market to the political wrangling in Washington. After nine years of central bank stimulus, the debate intensified this week around the impact of tighter policies as officials from Europe to the U.S. dished out hawkish messages to investors.

The euro surged 1.4 percent on Tuesday then had a tumultuous Wednesday session amid speculation investors misjudged comments from European Central Bank President Mario Draghi. U.S. banks have rallied this week as Federal Reserve chief Janet Yellen reiterated that the central bank’s tightening is on track. They extended gains after the close of regular trading Wednesday as banks received the greenlight from the Fed for capital return plans.

These are the main moves in markets:

Currencies

· The Bloomberg Dollar Spot Index slipped 0.1 percent as of 1:17 p.m. in Tokyo, dropping for a third day to the lowest since October.

· The euro increased 0.3 percent to $1.1406, the highest level since last year’s Brexit vote. The pound climbed 0.2 percent to $1.2954, heading for a seventh straight day of gains, the longest winning streak since April 2015.

· China’s yuan strengthened for a third day, with the offshore currency advancing 0.3 percent as President Xi Jinping kicks off a landmark visit to Hong Kong.

· The Canadian dollar held gains after jumping 1.2 percent on Wednesday as Bank of Canada Governor Stephen Poloz reiterated he’s considering tighter policy.

Stocks

· Japan’s Topix index gained 0.7 percent, heading for a third straight weekly advance. Australia’s S&P/ASX 200 Index rose 1.1 percent, with banks and basic materials shares gaining the most. The Kospi index advanced 0.6 percent.

· Hong Kong’s Hang Seng Index climbed 0.9 percent and the Shanghai Composite edged up 0.3 percent. Singapore’s Straits Times Index rallied 1.1 percent.

· Futures on the S&P 500 Index added 0.2 percent. The underlying gauge rose 0.9 percent on Wednesday, bouncing back from a loss of 0.8 percent. It’s on pace for a quarterly gain of 3.3 percent, the seventh straight advance. The Nasdaq Composite Index jumped 1.4 percent on Wednesday.

Commodities

· WTI futures advanced 0.5 percent to $44.94 a barrel, bringing its six-day rebound to more than 5.5 percent. Prices gained as government data showed a drop in U.S. gasoline supplies that have remained stubbornly high at the start of the summer driving season.

· Gold rose 0.2 percent to $1,252.17 an ounce, increasing for a third day.

Bonds

· The yield on 10-year Treasuries was flat at 2.23 percent after gaining two basis points on Wednesday and jumping seven basis points in the previous session.

· Australian benchmark yields rose four basis points to 2.50 percent, after surging 10 basis points on Wednesday.

Source: Bloomberg

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