Asian stock steady as investors pause for breath
NEWS DIGEST – Asian stocks steadied on Tuesday as investors paused for breath after the previous day’s rally, although tech-inspired Wall Street gains supported broader sentiment as the focus shifted to bullish economic fundamentals, away from trade concerns.
Spread-betters expected European stocks to open flat to slightly lower, with Britain’s FTSE declining 0.2%, Germany’s DAX little changed and France’s CAC slipping 0.2%. MSCI’s broadest index of Asia-Pacific shares outside Japan was effectively flat after surging 1.4% the previous day.
Japan’s Nikkei gained 0.2% and South Korea’s Kospi lost 0.1%. Hong Kong’s Hang Seng rose 0.15% and the Shanghai Composite index climbed 0.25% after data showed China’s services sector expanded at a steady pace in May.
Wall Street’s three major indices rose overnight, led by a rally in tech stocks, pushing the Nasdaq to a record closing high.
Friday’s better than expected May US employment report has helped revive investor optimism about the world’s biggest economy, shifting the focus away from recent trade tensions.
“Strong US data put fundamentals back in the spotlight, just as Italian political concerns were ebbing,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.
Italy’s anti-establishment parties formed a coalition government on Friday to end three months of deadlock and averting potentially destabilising snap elections.
“The next focal point is the upcoming FOMC (Federal open market committee) meeting and whether the Fed shows any indication of accelerating the pace of its rate hikes following the strong employment report,” said Ichikawa.
The Federal Reserve is scheduled to hold a two-day policy meeting starting on June 12.
With risk aversion ebbing in the broader markets, safe-haven government bonds were sold and their yields rose.
The 10-year US treasury note yield stood near an 11-day high of 2.946% brushed overnight.
The yield had declined to a one-and-a-half-month low of 2.759% a week ago when Italian political concerns had soured investor sentiment.
The rebound in US yields lifted the dollar to a near two-week high of ¥109.990 and also helped slow the euro’s advance against the greenback.
The euro slipped 0.1% to $1.1688, nudged off the 12-day peak of $1.1754 touched on Monday on the decrease in concern towards Italy.
“It is premature to declare that euro area uncertainties are over. Questions remain around how the new Italian government will agree to prioritise its spending objectives, how Rome will interact with Europe and how the US-EU trade dispute will evolve,” wrote Brian Martin, head of global economics at ANZ.
The dollar index against a basket of six major currencies gained 0.1% to 94.111 after edging down 0.2% overnight.
The Australian dollar declined 0.15% to $0.7636 after climbing to a six-week high of $0.7666 overnight on upbeat domestic data.
In commodities, oil prices edged higher after falling almost 2% in the previous session, but growing US production and the expectation of higher Opec supplies limited the bounce.
Brent crude futures added 0.15% to $75.40 a barrel after losing 2% on Monday.
US crude futures were up 0.5% at $65.07 a barrel after finishing the previous session down 1.6%. Safe-haven spot gold was little changed at $1,291.54/oz after posting three days of losses.
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