Asian stocks edged up on Thursday, encouraged by a rally in crude oil prices and expectations that the European Central Bank will ease policy later in the day, emulating policymakers elsewhere seeking to bolster their struggling economies.
“The euro’s weakness is indicating something positive out of the ECB meeting, so the market may rise further in the afternoon,” said Hiroaki Mino, director of investment information department at Mizuho Securities in Tokyo.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS nudged up 0.3 percent. Volatile Shanghai stocks .SSEC, however, dropped 0.6 percent after stronger-than-expected local inflation data was interpreted as a negative for the struggling economy. [.SS]
South Korea’s KOSPI .KS11 rose 0.8 percent and Hong Kong’s Hang Seng .HSI gained 0.6 percent. Japan’s Nikkei .N225 climbed 1.3 percent.
Spreadbetters expected modestly higher opens for Britain’s FTSE .FTSE, Germany’s DAX .GDAXI and France’s CAC .FCHI.
The focus was on how much the ECB, which had already cut rates into negative territory, would ease.
“The ECB is tonight widely expected to increase the amount of securities it buys from the market each month, as well as moving interest rates further into negative territory,” wrote Michael McCarthy, chief market strategist at CMC Markets.
“However, there are also market discussions around the idea that the ECB may be pushing on a piece of string, and that any stimulatory impacts of negative rates is overwhelmed by the signaling effect that Europe is in crisis.”
Euro zone government bond yields and short-term interest rates fell earlier this week after weak Chinese trade data further enhanced worries about the health of the global economy.
But after the ECB failed to meet the markets’ high expectations in December, traders remain wary about another disappointing outcome.
RBNZ SURPRISES WITH RATE CUT
The big surprise in Asia on Thursday came from New Zealand’s central bank, which cut the benchmark cash rate to a record low 2.25 percent.
Reserve Bank of New Zealand Governor Graeme Wheeler cited China as a major risk to the bank’s outlook for economic growth and inflation, reflecting global concerns over a slowdown in the world’s second-biggest economy.
“If China had a very significant and prolonged devaluation, it would in essence spread deflation around the world,” Wheeler told reporters, adding that China was building up a number of serious imbalances.
In recent months, gloom over China, tumbling commodity prices and deflationary pressures have prompted aggressive easing by central banks, including a move to negative rates by the Bank of Japan in January.
In currencies, the euro dipped 0.3 percent to $1.0977 EUR= with a wait-and-see mood ahead of the ECB decision limiting movements.
The dollar rose 0.3 percent to 113.68 yen JPY= against the safe-haven Japanese currency as equity and commodity market gains improved risk appetite.
The New Zealand dollar was a much bigger mover after the RBNZ’s unexpected rate cut. The kiwi hit a one-week low of $0.6618 after sliding well over 1 percent following the RBNZ’s rate cut.
Oil prices stood tall after surging overnight after a large U.S. gasoline inventory drawdown amid improving demand overshadowed growing record high crude stockpiles. [O/R]
Speculation that top oil producers might agree soon to an output freeze also supported crude prices. U.S. crude futures CLc1 was at $38.24 a barrel, having surged nearly 5 percent to hit a three-month high of $38.51 on Wednesday.
The bounce in crude oil and the Bank of Canada’s decision on Wednesday to refrain from cutting interest rates boosted the Canadian dollar, which hovered near a four-month high of C$1.3230 CAD=D4 per dollar.