July 3 (Bloomberg) -- Asian stocks headed for their biggest five-day gain this year and commodities rose to a one-month high on expectations that central banks in Europe and China will ease monetary policy to spur economic growth. The South Korean won and Australian dollar climbed.
The MSCI Asia Pacific Index gained 0.7 percent as of 2:04 p.m. in Tokyo while Standard & Poor’s 500 Index futures rose 0.1 percent. The S&P GSCI Index of commodities rose 0.9 percent as oil and corn futures advanced. The won strengthened 0.5 percent to 1,140.05 per dollar, near an eight-week high. The so-called Aussie rose 0.2 percent to $1.0266. Credit-default swaps for Asia ex-Japan gained for the first time in six days.
The European Central Bank is forecast by economists to cut interest rates this week to help curb the debt crisis, while a state-owned newspaper in China said the time is ripe for a reduction in banks’ reserve-requirement ratios. Declining employment figures in the U.S. this week may prompt the Federal Reserve to initiate fresh stimulus, BNP Paribas SA said. The Reserve Bank of Australia left borrowing costs unchanged today after cuts in each of the past two months.
“Disappointing economic readings are spurring expectations for more stimulus measures,” said Chung Yun Sik, the Seoul- based chief investment officer for equities at ING Investment Management Korea Ltd., which oversees about $17 billion. “Investors’ focus, at least for now, appears to have shifted away from Europe’s debt woes.”
More than three stocks rose for every one that fell on the MSCI Asia Pacific Index. The stocks gauge recorded its first quarterly decline since September in the three months through June 30 as Europe’s debt crisis and slowing growth in China and the U.S. dented the outlook for the region’s economies.
Five-Day Gain
The MSCI Asia Pacific Index has climbed 4.7 percent in five days, the most since the period ended Dec. 5 and the longest winning streak since March. All 10 major industry groups advanced today.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, advanced 2.6 percent, leading gains among financial firms. Canon Inc., a camera maker that gets about 31 percent of sales from Europe, climbed 1.4 percent in Tokyo. Tencent Holdings Ltd. led technology stocks higher in Hong Kong after Micron Technology Inc. agreed to buy Elpida Memory Inc. in the memory-chip industry’s largest consolidation in four years.
South Korea’s Kospi index increased 0.8 percent and Australia’s S&P/ASX 200 Index was down 0.1 percent.
BRICs Irresistible
The MSCI BRIC Index, which tracks equities in China, Brazil, Russia and India -- the so-called BRIC countries -- fell 1.8 percent during the first half of the year while the MSCI World Index of developed market stocks advanced 4.5 percent. That’s led to the widest valuation gap in seven years in terms of the value of stocks versus the BRIC economies’ contribution to global output, according to the International Monetary Fund and data compiled by Bloomberg.
The 4 percentage point difference makes stocks in these markets irresistible, according to Jim O’Neill, the chairman of Goldman Sachs Asset Management who coined the term BRIC in a 2001 research report.
Hong Kong’s Hang Seng Index, which tracks China’s biggest companies including the state-owned banks and energy producers, rose 1.5 percent, headed for the biggest two-day gain this year. The index didn’t trade yesterday because of a holiday.
Cutting reserve requirements may become the top choice for the People’s Bank of China to increase liquidity in the banking system, according to a commentary today on the front page of the China Securities Journal, which is published by the official Xinhua News Agency. The central bank announced a cut to interest rates on June 7, a day after the newspaper published a commentary urging the move.
RBA Decision
The Aussie rose as much as 0.4 percent against the dollar before the Reserve Bank of Australia announced it kept its cash- rate target at 3.5 percent, as expected by all 28 economists in a Bloomberg poll.
The U.S. dollar declined against all of its 16 major peers except the Japanese yen, before a report today forecast to show factory orders stagnating. Labor Department data on July 6 is forecast to show employers added fewer than 100,000 jobs for a third month, a sign that the world’s largest economy is cooling.
Concern about the pace of U.S. economic growth rose yesterday after the Institute for Supply Management’s manufacturing index for June showed a contraction for the first time in almost three years.
The yen fell against all its major peers as heightened risk appetite sapped demand for haven assets. The currency fell 0.3 percent to 79.72 per dollar.
“The yen is being sold as risk aversion eases,” Masakazu Sato, a foreign exchange adviser for Gaitame Online Co. in Tokyo. “The market is pricing in a rate cut by the ECB.”
ECB Stimulus?
European leaders will seek help from the European Central Bank when it meets on July 5. ECB officials will lower their benchmark rate by 25 basis points to a record low 0.75 percent, according to the median forecast in a Bloomberg survey of 57 economists. The bank has a track record of action following political progress, including bond purchases that followed bailout programs and unlimited three-year loans.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 2 basis points to 170 in Singapore, Standard Chartered Plc prices show. The index, which has ranged between 210 and 132.5 this year, had fallen for five consecutive days prior, according to CMA, which compiles prices quoted by dealers in the privately negotiated market.
Corn for December delivery surged as much as 2.5 percent to $6.72 a bushel on the Chicago Board of Trade, after jumping 15 percent last week. Crop conditions in the U.S., the biggest producer and exporter, deteriorated for a fourth straight week on hot, dry weather. Soybeans gained 0.6 percent and wheat futures rose 1 percent.
Oil in New York rose 0.8 percent to $84.38 a barrel. Copper in London surged 2 percent to $7,780 per metric ton, zinc climbed 1 percent and nickel was up 0.8 percent.
To contact Bloomberg News staff for this story: Chua Baizhen in Beijing at bchua14@bloomberg.net "
Steven Morris
CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
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