By Glenys Sim and David Yong - Jul 19, 2012 8:03 AM GMT+0400
Asian stocks advanced toward the biggest gain this month, South Korea’s won and copper climbed on speculation monetary easing by central banks around the world will spur economic growth. Bond risk in the region fell.
The MSCI Asia Pacific Index rose 1.5 percent at 12:09 p.m. in Tokyo as South Korea’s Kospi (KOSPI) index gained 1.9 percent. Standard & Poor’s 500 Index futures added 0.3 percent. The won and Malaysia’s ringgit both advanced 0.4 percent. Copper in London climbed for a second day. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan lost 2 basis points to 163, Credit Agricole SA prices show.
Soybean futures for November delivery reached $16.24 a bushel on the Chicago Board of Trade, the highest level for a most-active contract since July 2008, when the all-time high of $16.3675 was set. Photographer: Diego Giudice/Bloomberg
“The market is hoping that some stimulus measures from the U.S. and China are on the table,” said Irene Cheung, a Singapore-based currency strategist at Australia & New Zealand Banking Group. “This will be supportive of risk assets.”
Bond yields in emerging markets are falling to record lows as inflation tumbles compared with benchmark interest rates, providing policy makers with more opportunities to lower borrowing costs. U.S. data today may show first-time claims for jobless benefits rose, boosting prospects the Federal Reserve will increase stimulus measures. Fed Chairman Ben S. Bernanke yesterday outlined options to ease policy further in case the flagging economic recovery fails to lower unemployment.
China has “relatively large” room to boost fiscal spending to support economic growth as itsbudget deficit is still small and at a reasonable level, a government researcher said. The Bank of England restarted bond purchases this month to aid the economy and said the near-term outlook had “weakened.”
U.S. Housing
U.S. stocks rose for a second day yesterday as housing starts jumped to a four-year high and earnings at companies from Intel Corp. to Honeywell International Inc. beat estimates. Earnings have exceeded analyst estimates at 37 percent of the 51 companies in the S&P 500 that have reported results this month, according to data compiled by Bloomberg. Profits have slumped 5.5 percent for the group.
About four stocks rose for every one that fell on MSCI’s Asia stocks gauge, led by technology and energy shares. BHP Billiton Ltd., Australia’s biggest oil producer, gained 2.5 percent as crude prices exceeded $90 a barrel for the first time since May.
Oil advanced for a seventh day, the longest run of gains since February, after U.S. gasoline stockpiles unexpectedly dropped. Futures rose as much as 0.5 percent to a seven-week high of $90.29 in New York. Gasoline supplies decreased by 1.8 million barrels, according to an Energy Department report. They were projected to climb by 1.2 million, according to a Bloomberg News survey.
Copper, Beans
Three-month copper gained 0.5 percent to $7,676 a metric ton on the London Metal Exchange as orders to withdraw the metal from exchange warehouses in South Korea jumped to the highest since October, signaling improving demand in China, the largest user.
Soybean futures for November delivery reached $16.24 a bushel on the Chicago Board of Trade, the highest level for a most-active contract since July 2008, when the all-time high of $16.3675 was set. The drought in the Midwest, which fueled a 29 percent rally in the crop since the beginning of June, may persist for the rest of the growing season, the U.S. Department of Agriculture said yesterday.
The yen advanced against most major counterparts before German lawmakers vote today on a bailout for Spanish lenders. Chancellor Angela Merkel called on fellow leaders to work harder to make Europe succeed without waiting for unconditional German help. The Aussie dollar climbed to $1.0398, the highest level since May 1.
Bond Risk
The Markit iTraxx Australia index slid 4 basis points to 172 basis points, according to Westpac Banking Corp. The gauge is set for its lowest close since July 4, according to data provider CMA. The Markit iTraxx Asia index is also headed for its lowest close since July 4 according to CMA.
Consumer price increases in 15 developing nations from Brazil to China slowed to an average 4 percent last month, even as central banks cut the mean policy rate to 5.5 percent. The 1.5 percentage-point gap was the widest since Dec. 18, 2009, two weeks before the JPMorgan GBI-EM Global Diversified Index started an 11 percent rally, the biggest advance in six years.
Slower inflation and weaker economic growth will prompt policy makers to reduce interest ratesfurther, spurring gains in developing-nation bonds, according to GAM Investment and JPMorgan Chase & Co. That’s a turnaround from four years ago, when inflation exceeded benchmark borrowing costs and investors fled emerging markets as the global economy sank into a recession.
“We think the rising tide of monetary accommodation will put a floor under economic activity before the global economy hard lands,” Prakash Sakpal, a Singapore-based economist at ING Groep NV, wrote in a report today.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net;
David Yong in Singapore at dyong@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
