Asian shares hit 5-mth high on US relief, China data

Oct 18 2013, 12:33 IST
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Asian shares rose to a five-month high on Thursday as investors took heart from quickening growth in China. (Reuters) Asian shares rose to a five-month high on Thursday as investors took heart from quickening growth in China. (Reuters)
SummaryIn the coming week, investors will get a slew of U.S. economic data delayed by the shutdown.

Asian shares rose to a five-month high on Thursday as investors took heart from quickening growth in China a day after the United States sealed an 11th hour deal to break a confidence-sapping government shutdown.

The U.S. debt drama has also heightened speculation of the Federal Reserve delaying the start of its stimulus reduction plan, underpinning riskier assets but keeping the dollar pinned down to an eight-month low.

MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.5 percent to a five-month high, adding to a 0.6 percent rise in the previous session.

Investors were relieved after data showed China's economy grew 7.8 percent in the third quarter, its fastest pace this year and in line with expectations, as firmer foreign and domestic demand lifted factory production and retail sales.

Still, the reaction across Asia to the data was somewhat muted by the uncertainty about the outlook for global demand, underlined by a surprise fall in China's September exports.

China's CSI300 index ticked up 0.3 percent.

"The Q3 GDP figure is in line with market expectations but the uncertainty is whether the current recovery is sustainable," said Shen Jianguang, chief China economist with Mizuho Securities in Hong Kong.

Overnight, the U.S. Standard & Poor's 500 index closed at a record high. U.S. S&P E-mini futures added 0.2 percent in Asian trade on Friday, indicating a further rise when Wall Street opens later in the day.

U.S. Democrats and Republicans reached an 11th-hour agreement on Wednesday to break an impasse, pulling the world's largest economy from the brink of an historic debt default as the deal funds the government until Jan. 15 and raises the borrowing limit through to Feb 7.

Analysts said economic weakness resulting from the 16-day shutdown and uncertainty over the next round of budget and debt negotiations may keep the Fed from withdrawing monetary stimulus at least until a few months into next year.

A simple estimate suggested the direct and indirect impact of the shutdown would weigh on the annualized fourth-quarter gross domestic product growth by 0.4 percentage point, Morgan Stanley said.

In September, the Fed stunned markets by opting to delay trimming its $85 billion-a-month bond purchases. Stimulus tapering expectations have now been pushed down to December.

"The U.S. dollar is the worst performing currency as attention shifts from the U.S. debt debacle to incoming Fed rhetoric, and bond markets may be leading the way," said Christopher Vecchio, currency analyst at DailyFX.

"The U.S. Treasury yield

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