Asia markets higher, RBA holds rates steady

Asian markets bounced back on Tuesday with the central bank in Australia holding its benchmark rate steady and as market uncertainty faded following the failed referendum in Italy.

Australia’s ASX 200 rose 0.82 percent, seeing strength in its materials sub-index, which was up 1.16 percent and in its financials sub-index, which was up 0.86 percent.

The Reserve Bank of Australia, in its last monetary policy review for the year, held its cash rate at 1.5 percent as expected. The Australian central bank also said that a rising Aussie dollar might pose risks to the country’s economic transition, as it moves away from a resource-led economy.

The Australian dollar fell to $0.7451 against the dollar as of 11:42 am HK/SIN.

Data on China’s foreign currency reserves for November is due and average cash earnings in Japan rose 0.1%, unchanged from the same period in the previous year.

The Japanese benchmark Nikkei 225 surged 0.42 percent. The yen strengthened against the dollar, trading at 113.63 as of 11:08 am HK/SIN, after reaching 114 last week.

The Kospi gained 1.18 percent as South Korea’s finance ministry said it would assign 68 percent of its 2017 budget to be spend in the first half of the year to boost growth.

In other news, nine of South Korea’s top conglomerate leaders face a televised interrogation in parliament. The investigation is over whether the business leaders, which including Samsung and Hyundai Motor Group, were ever pressured by President Park Gen-hye or her friend Choi Soon-sil to give money to two non-profit foundations in exchange for special treatment.

The Shanghai composite was up 0.08 percent as the Shenzhen composite gained 0.32 percent. In Hong Kong, the Hang Seng gained 0.86 percent.

Global investors had shaken off the Italian referendum results, and shares had risen higher on Monday.

Major U.S. indexes closed higher with the Dow Jones industrial average up 0.24 percent at 19,216.24, the S&P 500 gained 0.58 percent at 2,204.71 and the Nasdaq composite ended 1.01 percent higher at 5,308.89.

Major European stocks had also finished higher after the referendum rejection, with the pan-European Stoxx 600 ended 0.56 higher, with almost all sectors in the green.

Italian Prime Minister Matteo Renzi announced Monday he would step down after being defeated in a constitutional reform referendum, as voters showed a “clear” rejection of legislative reform measures. However, Renzi is expected to stay on until the passage of a federal budget in the next few days.

The reforms would have made it so that the executive branch needs approval only from parliament’s lower house in order to pass laws, and simplify the legislative process.

On the currency front, the euro was trading at 1.076 against the dollar as of 11:10 am HK/SIN. The pair had fallen to a 20-month low of $1.0503 on Monday.

The rebound of the euro was in part due to the fact that “investors don’t view the Italian ‘no vote’ on Senate reform as a ‘no vote’ on EU membership…based on the relatively mild sell-off in Italian bonds, the sharp rise in the euro/dollar and rally in European stocks,” said Kathy Lien, managing director of FX strategy at BK Asset Management, in a note on Tuesday.

“This is not the same as Brexit, which dramatically changes the very fabric of U.K. politics and economics,” she explained.

The dollar index, which tracks the greenback against a basket of currencies, was tracking 100.1, down from Monday’s levels above 101.

Oil prices slipped on Tuesday, U.S. crude futures fell 0.85 percent to $51.35 a barrel and Brent futures dipped 0.62 percent at $54.59.

Source: CNBC

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