Japan shares reach 10-week high, look past Sino-US tension

Japan’s Nikkei led the way with a rise of 1 per cent to its highest since early March when the economic impact of the coronavirus was just becoming clear. — AFP pic
Japan’s Nikkei led the way with a rise of 1 per cent to its highest since early March when the economic impact of the coronavirus was just becoming clear. — AFP pic

SYDNEY, May 26 — Asian shares crept ahead today following an upbeat session in Europe and further gains in US stock futures as investors looked past Sino-US trade tensions to a re-opening world economy.

Japan’s Nikkei led the way with a rise of 1 per cent to its highest since early March when the economic impact of the coronavirus was just becoming clear.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.1 per cent in early trade, while South Korea rose 0.4 per cent.

While Wall Street had been shut yesterday, E-Mini futures for the S&P 500 were up just over 1 per cent after EUROSTOXX 50 futures added over 2 per cent yesterday.

European sentiment got a lift when a survey showed German business morale rebounded sharply in May as activity gradually returned to normal after weeks of lockdowns.

That helped offset the war of words between Washington and Beijing over trade, the coronavirus and China’s proposals for stricter security laws in Hong Kong.

“US-China tensions continue to simmer in the background, but equity investors appear more interested on the prospect of economies reopening around the globe,” said Rodrigo Catril, a senior FX strategist at NAB.

“On this score, Japan ended its nationwide state of emergency, Spaniards have returned to bars in Madrid wearing masks and England will reopen some businesses on June 1.”

Bond investors suspect economies will still need massive amounts of central bank support long after they reopen and that is keeping yields low even as governments borrow much more.

Yields on US 10-year notes were trading at 0.65 per cent having recovered from a blip up to 0.74 per cent last week when the market absorbed a tidal wave of new issuance.

The decline in US yields might have been a burden for the dollar but with rates everywhere near or less than zero, major currencies have been holding to tight ranges.

The dollar was a fraction firmer on the yen yesterday at 107.75 but well within the 105.97 to 108.08 band that has lasted since the start of May.

The euro was all but flat at US$1.0900 (RM4.76), having spent the month so far wandering between US$1.0765 and US$1.1017.

Against a basket of currencies, the dollar was idling at 99.788, sandwiched between support at 99.001 and resistance around 100.560.

Analysts at CBA felt the dollar could break higher should China-US tensions actually threaten their trade deal.

“Although not our central scenario, if the US or China were to withdraw from the Phase One deal, USD would sharply appreciate while CNH, AUD and NZD would decline,” they wrote in a note to clients.

In commodity markets, gold edged down 0.1 per cent to US$1,727 an ounce.

Oil prices were supported by falling supplies as Opec cut production and the number of US and Canadian rigs dropped to record lows for the third week running.

Brent crude futures rose 12 cents to US$35.65 a barrel, while US crude gained 67 cents to US$33.92. — Reuters

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