Most Asian stock markets rose on Monday, with Europe set to follow, as
fears eased that Washington would draft a harsh bill for regulating the
banking sector and after an unremarkable conclusion to a Group of 20
leaders’ summit.
G20 leaders meeting in Toronto agreed to take
their own paths to ensuring economic growth and left room to move at
their own pace, trying to balance contrasting priorities by pledging to
halve budget deficits by 2013 without stunting growth.
The
heads of the G20 rich and developing nations also promised to clamp down
on risky behaviour by banks without restricting lending, and agreed to
give banks more time to adopt tougher rules.
That followed an
historic overhaul of financial regulations by U.S. lawmakers on Friday,
with banks forced to spin off swap trading operations. Banks will be
able to keep most of their books but will be barred from commodity,
equity and some credit default swaps.
“I don’t see much
substance from G20,” said Lin Yuhui, deputy general manager of Jinhui
Futures.
“Basically it’s saying everyone is back to minding
their own business, just like before the crisis,” Lin said.
The
MSCI index of Asia Pacific shares outside Japan rose 0.6 percent, with
financial shares outperforming. Hong Kong stocks led the way, rising 0.4
percent.
Financial bookmakers said Europe’s main benchmark
indexes would likely head in the same direction, with spreadbetters
expecting Britain’s FTSE 100, Germany’s DAX and France’s CAC- 40 to open
as much as 0.9 percent higher.
U.S. stock futures were
slightly weaker, however.
Investors will have to weather a
welter of U.S. data this week, including June jobs numbers on Friday,
consumer confidence, pending home sales and some early earnings reports.
U.S. economic data has been mixed in recent weeks, raising
doubts about the strength of its recovery.
In Tokyo, the Nikkei
share average fell 0.5 percent, extending falls after closing last week
below a key support level and booking its biggest weekly loss in a
month with an indecisive outcome likely in an upper house poll next
month.
A muted reaction to the G20 meeting didn’t help, with
the Japanese market slipping across the board.
Wall Street had
finished almost unchanged on Friday, although financial stocks had
gained on relief the U.S. financial regulation bill would not inhibit
Wall Street profits as much as had been feared.
Underlining the
less-than-decisive conclusion to the G20 summit, Angel Gurria, head of
the Organisation for Economic Co-operation and Development, said the
“incipient recovery” offered policy choices but also made it harder to
find common ground.
“When the house was on fire, we all knew
what to do: get a hose,” Gurria told G20 leaders.
Asian debt
spreads narrowed after widening in the previous four sessions, with
investors encouraged to buy riskier assets after the G20 leaders
committed to cutting budget deficits.
The Asia ex-Japan iTraxx
investment-grade index narrowed 7 basis points (bps) from Friday to
132/134, a Singapore-based trader said. CHINA MUTES YUAN TALK
Signalling
the difficulties groups such as the G20 have in addressing matters
crucial to global economic imbalances, China succeeded in having a line
praising its decision to move towards a more flexible exchange rate
removed from the G20 communique.
Beijing maintains debate about
the yuan has no place in international forums, and did not want even a
positive reference to the currency to set a potential precedent for
singling its currency out.
The People’s Bank of China set the
yuan’s daily mid-point at 6.7890 against the dollar on Monday, a new
post-2005 revaluation high.
The yuan has risen about 0.5
percent in the past week since the PBOC said on June 19 that it was
unshackling the currency from its two-year-old peg to the dollar, but
gains have been kept in check by big state-owned banks and any further
appreciation is expected to be glacial.
Japan’s retail sales in
May rose 2.8 percent from a year ago, their slowest annual pace since
January, in a sign consumption driven by government stimulus spending
may be slowing. Retail sales had been surging since the start of the
year, helped by government subsidies for durable goods.
Investors
seeking to cut long positions in favour of the greenback had the dollar
on the defensive on Monday. The euro held gains as the focus shifted to
the sustainability of a U.S. recovery from euro zone debt worries.
The
dollar index edged up 0.1 percent to 85.43, holding above last week’s
low of 85.09. The dollar hovered near a five-week trough against the yen
after data released on Friday showed U.S. gross domestic product in the
first quarter grew more slowly than expected.
“I have a
feeling in my bones that perhaps Friday was the start of the market
questioning the viability of the U.S. as the safe haven,” said Tim
Lovell, an economist at ICAP in Sydney. Higher commodities and the
subdued U.S. dollar helped the Australian and New dollars. The
Australian dollar held firm at around $0.8750. U.S. crude oil futures
briefly rose to their highest in nearly eight weeks at $79 a barrel as
tropical storm Alex forced Mexico to reduce oil exports and some U.S.
producers to evacuate platforms and curb output.
