Asia Stocks Gain, Rate Cut Sends Kiwi Tumbling

Asian stocks rose on Thursday, encouraged by gains on Wall Street, while the New Zealand dollar tumbled to a five-year low after the central bank cut interest rates for the first time in four years.

South Korea’s central bank also eased, cutting its rate to a record low 1.50 percent to offset the potential impact of an outbreak of Middle East Respiratory Syndrome (MERS).

Spreadbetters expected a flat to slightly lower open for Britain’s FTSE .FTSE, Germany’s DAX .GDAXI and France’s CAC .FCHI. While Greece appeared to move towards finally clinching a cash-for-reform deal with its creditors, lingering uncertainly was seen capping European share prices.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.5 percent.

Market reaction was limited to latest Chinese data that showed the world’s second largest economy’s fixed-asset investment grow more slowly than expected, while growth in retail sales and factory output steadied. ECONCN

The Shanghai Composite Index .SSEC nudged down 0.2 percent.

Tokyo’s Nikkei .N225 added 1.4 percent while Australian shares gained 1.3 percent and South Korea’s Kospi advanced 0.3 percent.

U.S. stocks jumped overnight, helped by gains in technology and financial shares. The Dow .DJI rose 1.3 percent and the S&P 500 .SPX gained 1.2 percent.

Wall Street had suffered through much of the week, weighed by concerns that the Federal Reserve would hike rates sooner rather than later, and fears that Greece would default on its debt.

In currencies, the New Zealand dollar slid more than 2 percent on the day to a five-year low of $0.7000 NZD=D4 after the Reserve Bank of New Zealand cut rates to 3.25 percent. Most economists had not expected a cut while market players had said it would be a close call.

The kiwi took a further hit as the RBNZ, which had hiked rates just last year, joined the global rate-cutting club and said it would ease again if needed.

“The RBNZ has again proved to be more flexible than the market gives it credit for,” said Michael Turner, a strategist at RBC Capital Markets.

“The main message is that it’s just very hard to find upside risks to inflation right now and the bank is getting on the front foot to push it higher.”

The South Korean won showed a muted reaction to the rate cut there, with the Bank of Korea expected to have eased sooner or later. The easing did nudge South Korea’s 10-year bond KR10YT=RR yield below that of its U.S. counterpart for the first time in nearly 10 years.

“We decided to cut rates today in a pre-emptive move to contain the economic fallout from MERS,” Bank of Korea Governor Lee Ju-yeol told a media briefing.

The yen gave back some of its gains against the dollar. The Japanese currency had rallied after Bank of Japan Governor Haruhiko Kuroda said the yen is already “very weak.”

The greenback was last up 0.4 percent at 123.21 yen JPY=, but still some distance from a 13-year high of 125.86 touched Friday on robust U.S. non-farm payrolls data.

The euro was down 0.2 percent at $1.1302 EUR=. The common currency has gained 1.7 percent so far this week, helped by a lingering spike in euro zone debt yields.

German benchmark 10-year Bund yields DE10YT=TWEB rose above 1 percent overnight for the first time since September as the market’s long-term inflation expectations, a driver of the two-month assault on global bonds, hit three-week highs. [GVD/EUR]

Climbing German yields have in turn pulled up U.S. and Japanese yields. The benchmark U.S. and Japanese 10-year government yields have both risen to nine-month highs of around 2.5 percent US10YT=RR and 0.55 percent JP10YTN=JBTC this week.

In commodities, U.S. crude gave up some of its gains from rallying overnight, when a big U.S. stocks drawdown boosted the outlook for summer fuel demand.

U.S. crude was down 0.3 percent at $61.25 CLc1 after jumping 2 percent on Wednesday. Brent LCOc1 shed 0.2 percent to $65.59 after a 1 percent gain.

Source : Reuters