Asian stocks set for best weekly gain in nine years, ECB stimulus boosts euro; US jobs eyed

Asian stocks erased early losses today and were poised for their biggest weekly rise since 2011. — Reuters pic
Asian stocks erased early losses today and were poised for their biggest weekly rise since 2011. — Reuters pic

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SYDNEY, June 5 — Asian stocks erased early losses today and were poised for their biggest weekly rise since 2011 while the euro hovered near a 1-1/2 month high as Europe’s central bank surprised with more stimulus, fuelling hopes for a global rebound.

The market was a bit choppy as some investors chose to take profits ahead of today’s nonfarm payrolls data, which is expected to show further deterioration in the US jobs market.

MSCI’s broadest index of Asia-Pacific shares outside of Japan rose 0.1 per cent, reversing early losses to stay near a 12-week top.

The index is up about 6.5 per cent this week, on track for its best weekly showing since December 2011.

South Korea’s KOSPI was among the best performers today, up 0.7 per cent while Australia’s benchmark index and Japan’s Nikkei each added 0.1 per cent.

Chinese shares were still in red with the blue-chip index off 0.3 per cent.

Emerging market equities, which have boasted solid gains this week, were in a profit taking mode.

“This market has gone up so far, so fast there’s a lot of people saying, ‘I’m going to take a little profit,’” said Jim Paulson, chief investment strategist at The Leuthold Group in Minneapolis.

E-mini futures for the S&P 500 rose 0.3 per cent.

Overnight, the S&P 500 eased 0.34 per cent and the Nasdaq Composite lost 0.69 per cent. The Dow bucked the trend and ended a shade higher.

Investors were a tad cautious at these heady levels with valuations at their highest since the dot.com boom in 2000, according to Matthew Sherwood, investment strategist for Perpetual.

Technical chart indicators suggest the market is at “over-bought” levels, Sherwood added, a signal that a correction is due.

World equity markets were thrashed in March when they hit “bear territory” on fears the Covid-19 driven lockdowns would push the global economy into a long and deep recession.

Market sentiment has since been bolstered by powerful central bank stimulus.

“Central banks have rightly stepped in to cushion the economic blow of Covid-19 and unquestionably succeeded in steadying the ship,” said Bob Michele, chief investment officer and head of the global fixed income, currency & commodities group at JPMorgan Asset Management.

However, Michele warned the massive scale of quantitative easing would distort pricing and mute traditional signals from bond markets on growth and inflation, advocating “co-investing” alongside central banks.

Investor attention is now focused today’s US employment report, which is expected to show nonfarm payrolls fell in May by eight million jobs after a record 20.54 million plunge in April.

The US unemployment rate is forecast to rocket to 19.8 per cent, a post-World War Two record, from 14.7 per cent in April.

Currency markets show continued confidence in the expected revival of the global economy.

The euro was last at US$1.1337 after hitting a 12-week high of US$1.1361 yesterday led by the European Central Bank’s (ECB) plan to boost its emergency bond purchases.

The common currency is up 2 per cent this week, on track for its third consecutive weekly gain.

All eyes will next be on the US Federal Reserve, which holds its regular two-day policy meeting next week.

The US dollar was a tad higher against the Japanese yen at 109.19, having risen 1.2 per cent so far this week.

The dollar index, which measures the greenback against a basket of major currencies, is poised for its third straight weekly loss.

The risk sensitive Australian dollar held near a five-month peak at US$0.6947, on track for its third straight weekly rise.

In commodities, US crude eased 4 cents to US$37.37 per barrel and Brent added 8 cents to US$40.07.

Spot gold inched down to US$1,709 an ounce. — Reuters

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