Asian shares within reach of 2016 peak as risk appetite improves
TOKYO, July 13 (Reuters) – Asian shares came within reach of testing their 2016 peak on Wednesday as prospects of solid U.S. growth and accommodative economic policy in major countries whet investors risk appetite damaged by uncertainty from Brexit.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2 percent in early trade to 426.62, just below its year-to-date high of 428.22. Japan’s Nikkei gained 1.9 percent.
MSCI’s broadest gauge of the world’s stock markets has recovered all the losses after Britain’s referendum to hit its highest level in over a month.
"A while ago, everything looked so uncertain on Brexit. But now the UK looks set to have a new prime minister and negotiations may begin earlier. That is soothing investor sentiment," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
Interior minister Theresa May is set to take over as Britain’s prime minister on Wednesday.
On Wall Street, S&P 500 gained 0.7 percent to a new record close of 2,152.14 while the Nasdaq turned positive for the year.
Cyclical sectors like technology, materials and energy posted the largest gains on the S&P, after Friday’s jobs data bolstered the view that the U.S. economy is on solid footing despite a slow start to the year.
European bank shares, seen as one of the weakest links in the global economy, rose as Italy moved closer to a deal with the EU executive to safeguard its struggling banks.
In Japan, Prime Minister Shinzo Abe ordered a new round of fiscal stimulus spending after an election victory.
His meeting on Tuesday with former U.S. Federal Reserve Chair Ben Bernanke, a proponent of "helicopter money" policies – printing money and directly handing it to the private sector to stimulate the economy – fueled speculation Abe’s stimulus could be funded by the Bank of Japan’s easing.
Such expectations pushed down the yen 4 percent over the last two days. The yen last traded at 104.67 yen to the dollar .
Elsewhere, the Bank of England makes its policy announcement on Thursday, with some players expecting a rate cut.
The European Central Bank is also widely expected to take a dovish stance when it holds its policy review a week later.
The British pound surged almost two percent on Tuesday to $1.3250 as investors bought back the currency on May’s appointment as prime minister.
The euro was little changed at $1.1060.
Oil prices dropped more than one percent in early Asian trade after industry group American Petroleum Institute (API) reported a surprise build of 2.2 million barrels in U.S. crude stockpiles last week.
Brent crude futures fell 1.0 percent to $47.97.
They had surged about 5 percent on Tuesday, however, on short-covering and broad improvement in risk sentiment.
In Asia, one key focus is Chinese trade data later in the day, which will come ahead of China’s GDP data on Friday, which is expected to show its growth is slowing to a seven-year low.