Obama talks at the 2012 Tribal Nations Conference at the Department of Interior in Washington, December 5, 2012. — Reuters pic
TOKYO,
Dec 6 — Asian shares rose to a 16-month high today after US President
Barack Obama said a deal to avert the so-called fiscal cliff of year-end
tax hikes and spending cuts was possible in “about a week” if
Republicans compromise on taxes.
The US$600 billion (RM1.8 trillion) combination could push the US
economy into recession unless Congress acts, but markets have kept up
hopes for a compromise given the consequences of no action.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.2
per cent to reach a 16-month high and Japan’s Nikkei stock average
climbed 0.8 per cent to a seven-month high, as exporters drew support
from a weaker yen.
The Korea Composite Stock Price Index (KOSPI) rose 0.4 per cent to a
seven-week high, although the lack of a US fiscal deal was capping the
upside potential of the market.
“The market is struggling to rise sharply, weighed down by concerns
about an uphill political battle to reach a US fiscal deal,” said Lee
Kyeong-soo, an analyst at Shinyoung Securities.
Hong Kong shares hit a 16-month peak while the Shanghai Composite
Index fell 0.2 per cent, retreating after a move yesterday above the
2,000-point mark for the first time since late November.
Year-end positioning was driving flows while investors waited for the
European Central Bank’s policy decision later in the day and US jobs
data tomorrow for clues on the state of the US economy after recent
mixed reports.
“Today, sentiment is likely to be neutral in Asia, amid lack of major
data and as investors look towards tomorrow’s labour market report in
the US,” said Credit Agricole CIB analysts in a research report.
Market attention on US fiscal woes probably reflected more investor lethargy than any real US concern, they said.
“Once markets fully embrace a ‘two-step’ US fiscal solution between
Democrats and Republicans (i.e. with any grand bargain coming in Q1
2013), a comparison of expected 2013/14 growth profiles clearly favours
renewed (US dollar) strength,” they said.
The dollar edged up 0.1 per cent against a basket of major
currencies. It traded at 82.49 yen, not far from a 7-1/2-month high of
82.84 hit on November 22, on expectations Japan’s December 16 election
will usher in a government that will apply more pressure on the central
bank to revive the shrinking economy.
The euro eased 0.1 per cent to US$1.3057, off a seven-week high of
US$1.3127 touched yesterday before a disappointing Spanish bond auction
reminded investors of the country’s fragile fiscal health, prompting a
selloff in the single currency.
Weak euro zone economic data also dampened sentiment for the euro,
with a mixed batch of business and retail data showing shoppers cut back
on spending in October by the biggest margin in six months, while
purchasing manager figures pointed to another quarter of recession.
The European Central Bank is expected to keep its benchmark interest
rate on hold at 0.75 per cent, and investors will be looking for clues
on whether ECB President Mario Draghi will show a greater willingness to
cut borrowing costs in the future as the euro zone recession deepens.
Ahead of key US monthly nonfarm payrolls due tomorrow, private
payrolls processor ADP reported that private-sector employers added
118,000 jobs in November, fewer than expected as Superstorm Sandy took a
toll on hiring, although activity in the service sector continued to
expand.
Data from Asia today illustrated a patchy economic picture.
Australian employment topped expectations for a second month in
November and the jobless rate unexpectedly fell to a three-month low of
5.2 per cent, lifting the local currency by a third of a US cent to
US$1.0471.
The report could lessen the urgency for the Reserve Bank of Australia
to follow up with more interest rate cuts to support growth, after it
earlier this week eased rates to match the record low 3 per cent touched
during the global financial crisis.
Growth this year in Asia’s fourth-largest economy, South Korea, will
likely fall below the Bank of Korea’s 2.4 per cent target, the central
bank said today.
US crude futures were little changed at US$87.85 a barrel and Brent also steadied around US$108.84.
Spot gold was nearly flat at US$1,693.80 an ounce. Gold fell to a
one-month low below US$1,700 yesterday, after a weaker price forecast by
Goldman Sachs triggered some fund liquidation. — Reuters
