Asian stocks at three-month highs on US cues, dollar rebounds for now
HONG KONG – Asian stocks edged up to three-month highs on Wednesday, helped by a firm finish on Wall Street, while a rebound in the dollar looked vulnerable as some investors grew sceptical about US President Trump’s policies translating into further gains.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.1 percent to its highest levels since late October. Australia and Japan led regional stock markets higher.
“There has been a broad unwinding of short dollar positions in recent days but unless the scale of the likely fiscal stimulus from the US becomes clearer, prompting the Fed to become more hawkish, the dollar will trade in broad ranges against major rivals,” said Adarsh Sinha, an FX strategist at Bank of America Merrill Lynch in Hong Kong.
The dollar snapped its recent losing streak and Treasury yields pushed higher overnight as Trump shifted his focus back to growth initiatives including promising corporate tax breaks to fuel US investment, after focusing on protectionism in his first few days in office.
Trump signed two executive orders on Tuesday to move forward with construction of the controversial Keystone XL and Dakota Access oil pipelines, rolling back key Obama administration environmental actions in favour of expanding energy infrastructure.
He also met chief executives of the Big Three US automakers and pressed them to build more cars in the United States.
The dollar halted a three-day losing streak against a basket of its trade-weighted rivals and pushed higher on Tuesday, though it dipped again slightly on Wednesday.
Sterling added to overnight gains and was trading at 1.2524 per dollar after Britain’s Supreme Court ruled that the government would need approval from Britain’s parliament before formally triggering the country’s departure from the European Union. It has bounced 4 percent over the last week.
“While some calm has come over the foreign exchange market in the past 18 hours, dealers are on a razor’s edge,” said Stephen Innes, senior trader at online FX platform OANDA in Singapore.
Though the S&P 500 and Nasdaq set records on Tuesday in a broad rally led by financial and technology stocks, market valuations looked stretched according to some metrics. The S&P 500 is trading at about 17 times forward 12-month earnings, according to Thomson Reuters Datastream, compared with the 10-year median of 14.2
In bond markets, US Treasury yields rose with two-year benchmark yields holding firm at 1.22 percent compared to 1.15 percent on Tuesday, reflecting strong economic conditions. Ten year yields were at 2.47 percent.
Oil prices consolidated overnight gains. Brent futures dipped 13 cents or 0.2 percent to $55.31 per barrel, after rising 0.4 percent overnight. Renewed optimism over Trump’s growth policies took the wind out of a recent rally in safe-haven gold, which steadied at around $1,210 per ounce. -Reuters