Asian shares near 2016 highs as risk appetite improves

Asian shares came within reach of their 2016 highs on Wednesday as prospects of solid U.S. growth and accommodative economic policy in major markets whet investors’ risk appetite damaged by uncertainty from Brexit.

Spreadbetters expected European shares to take a breather following days of gains, forecasting a slightly lower open for Britain’s FTSE .FTSE, Germany’s DAX .GDAXI and France’s CAC .FCHI. U.S. stock futures ESc1 dipped 0.1 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose as much as 0.4 percent to 427.83, just below its year-to-date high of 428.22 hit on April 21.

Japan’s Nikkei .N225 gained 1.1 percent.

Australian stocks added 0.5 percent and South Korea’s Kospi .KS11 rose 0.6 percent. New Zealand shares .NZ50 inched down 0.1 percent but were near a record high struck Tuesday. Shanghai .SSEC advanced 0.4 percent.

“A while ago, everything looked so uncertain on Brexit. But now that the UK looks set to have a new prime minister … that is soothing investor sentiment,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Britain’s interior minister Theresa May is set to take over as prime minister on Wednesday.

Elsewhere, Philippine shares .PSI reached a more than 1-year high and Vietnam .VNI scaled an 8-year peak.

In Japan, Prime Minister Shinzo Abe ordered a new round of fiscal stimulus spending, as expected, after an election victory on Sunday.

Abe’s meeting on Tuesday with former U.S. Federal Reserve Chair Ben Bernanke, a proponent of “helicopter money” policies – printing money and directly handing it to the private sector to stimulate the economy – fueled speculation that some of Abe’s stimulus plan could be funded by the Bank of Japan’s easing.

Such expectations pushed down the yen 4 percent over the last two days. The yen last traded at 104.22 yen to the dollar JPY=.


The Bank of England makes its policy announcement on Thursday, with some players expecting a rate cut.

The European Central Bank is also widely expected to take a dovish stance when it holds its policy review a week later.

“After being faced with the prospect of a major slowdown in global activity in the wake of the Brexit vote, governments and central banks worldwide are now expected to do their utmost to reassure markets and provide stimulus,” wrote Angus Nicholson, market analyst at IG in Melbourne.

“This has led to an incredible rally in equities and industrial commodities. Of course, should those expectations fail to eventuate they could stop the rally short. The greatest unknown for markets is what will happen in mainland Europe.”

The pound GBP=D4 traded at $1.3308 after surging almost two percent on Tuesday, pulling away from a 31-year low of $1.2798 struck late in June, as investors bought back the currency on May’s appointment as prime minister.

The euro was little changed at $1.1066 EUR=.

In commodities, oil prices dropped after industry group American Petroleum Institute (API) reported a surprise build of 2.2 million barrels in U.S. crude stockpiles last week. [O/R]

Brent crude futures LCOc1 fell 1.2 percent to $47.90 after surging roughly 5 percent on Tuesday on broad improvement in risk sentiment.

Zinc CMZN3 touched a 13-month high of $2,210 a tonne and nickel climbed to a 10-month peak of $10,670 a tonne CMNI3. Aluminum and copper have also gained.

Source: Reuters

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