Asian stocks rose yesterday to their highest level since the dark days following Lehman Brothers’ collapse last September while the US dollar fell, as a solid outlook for corporate earnings lured investors to riskier, higher-yielding assets and commodities.
European stocks were also set for a firmer open and headed for their sixth straight day of gains.
Record low global interest rates and trillions of dollars in stimulus spending appear to be helping the world recover from the worst recession in 80 years. Sentiment was also helped after CIT Group Inc clinched a last-minute US$3 billion rescue by a group of bondholders and probably esaped bankruptcy.
Aside from more company earnings reports, the highlight for global markets this week will be US Federal Reserve Chairman Ben Bernanke’s testimony to Congress today and tomorrow, especially any comments he makes on exit strategies from extraordinary actions taken to support the economy.
“We expect him to boost market confidence that the US central bank will do so in a way minimizing negative impact on price stability and the US dollar,” said Dariusz Kowalczyk, chief investment strategist with SJS Markets in Hong Kong.
“We expect consolidation of equity markets after last weeks rally, modest correction in commodities, some narrowing of corporate CDS spreads, modest rebound in Treasuries, and a small gain in the dollar,” he said in a note.
Japan’s markets were shut yesterday for a public holiday. The MSCI index of Asia Pacific stocks outside Japan rose 2 percent to its highest level since Sept. 29, putting it on track for a fifth consecutive session of gains.
Gains were spread fairly evenly across the sectors, with materials, technology and financials leading.
Hong Kong’s Hang Seng jumped 2.4 percent, supported by bank stocks.
South Korea’s KOSPI closed 2.7 percent higher, a near 10-month high, while Australia’s S&P/ASX 200 index was up 1.3 percent, boosted by higher commodity prices.
Strong earnings and positive economic reports, such as a surprising rise in US housing starts last month, helped US stocks close out their best week in four months on Friday.
Of the S&P 500 firms that have reported quarterly results so far, 71 percent have beat analysts’ expectations, 20 percent were below estimates and 9 percent were in line, Thomson Reuters data shows.
While this positive momentum has lifted equity markets, large credit-related losses at Bank of America and an unexpected drop in revenue at General Electric Co were stark reminders of corporate America’s struggle.
The US dollar and yen slid in choppy trade, as investors leaned toward higher-yielding currencies. The euro climbed 0.8 percent to ¥134.25, while the dollar rose 0.4 percent to ¥94.73.
US crude for delivery next month rose 1.1 percent to US$64.26 a barrel, after rising 2.5 percent on Friday on positive US housing data that revived hopes of a global economic recovery.
After failing twice last month to make much progress above US$71 a barrel, the front-month contract fell a week ago to a two-month low of US$58.32.
The September Brent crude contract rose 0.9 percent to US$65.98 a barrel.