1. Asian shares edge up, oil wobbles as markets await China surveys

Asian shares edge up, oil wobbles as markets await China surveys

Asian shares started a new month on somewhat firmer footing on Monday, helped by accommodative monetary policies in Japan and Europe, but traders were cautious ahead of China factory...

By: | Tokyo | Published: February 1, 2016 8:22 AM
Asian Shares, asian stocks, asia stocks market

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.1 percent, after losing 8 percent in January. (Reuters)

Asian shares started a new month on somewhat firmer footing on Monday, helped by accommodative monetary policies in Japan and Europe, but traders were cautious ahead of China factory and service sector activity surveys.

A rebound in oil prices last week also helped sentiment, though Brent crude fell about 1 percent in early Asia trade.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.1 percent, after losing 8 percent in January.

Shares in Australia rose 0.9 percent and South Korea 0.6 percent.

Activity in China’s vast factory sector likely contracted for the sixth consecutive month in January, a Reuters polled showed, underlining a weak start for the year and heightening concerns of a deeper economic slowdown. Official data is due at 0100 GMT.

Japan’s Nikkei rose 1.3 percent to a three-week high, extending its gains made on Friday following the Bank of Japan’s decision to introduce negative interest rates with another bold move to stimulate the economy as volatile markets and slowing global growth threaten its efforts to overcome deflation.

The BOJ said it would charge for a portion of bank reserves parked with the institution, an aggressive policy pioneered by the European Central Bank (ECB). Earlier in January, the ECB indicated it could cut rates further in March.

“The fact that both the BOJ and the ECB suddenly showed additional easing stance after the markets’ rout suggests policymakers in Japan and Europe share concerns and take actions,” Masafumi Yamamoto, chief currency strategist at Mizuho Securities, said.

“While that wouldn’t be a complete solution to fall in oil prices and concerns about slowdown in China, it will ease excessive reactions in markets,” he said.

The People’s Bank of China is also expected to ease policy this year, though using more conventional tools such as policy rate cuts, bank reserve reductions and liquidity injections.

In contrast, the U.S. Federal Reserve has so far stuck to the script that it will gradually raise interest rates later this year.

Yet a sharp braking of U.S. economic growth in the fourth quarter, revealed on Friday, fuelled expectations that the Fed will not be able to hike rates four times this year as it has indicated.

The price of Federal Fund rate futures are pricing in barely one rate hike this year while the rate-sensitive U.S. two-year yield fell to three-month low of 0.766 percent on Friday. It last stood at 0.777 percent.

The U.S. 10-year debt yield fell to 1.93 percent , edging near a double-bottom around 1.90 percent made in August-October, also helped by speculation Japanese investors will go after U.S. bonds as domestic bond yields plunge.

On Monday the 10-year Japanese government bond yield hit a record low of 0.050 percent while the two-year yield hit a record minus 0.100 percent.

Negative interest rates pressured the yen, which traded at 121.38 to the dollar, near six-week low of 121.70 touched on Friday.

The euro was steadier at $1.08285.

Oil prices fell, with international benchmark Brent 38 cents at $36.61 a barrel.

It has bounced more than 30 percent from a 12-year low hit less than two weeks ago, taking some pressure of reeling global equity markets.

Investors grew wary of the possibility that the Organization of the Petroleum Exporting Countries and Russia could team up to cut supply.

Appetite in oil and other risk assets could hinge partly on manufacturing data out of China later in the day.

“Despite the perception the six-year slowing in China’s economy is now becoming more rapid, we have yet to see real evidence of this in China’s hard economic data. Midday today (Sydney time) will provide us a chance,” said Richard Grace, chief currency and rates strategist at Commonwealth Bank in Sydney.

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