Asian markets within reach of 2016 peak as global stocks erase Brexit losses

A pedestrian walks past an electronic indicator of the Tokyo stock market.
A pedestrian walks past an electronic indicator of the Tokyo stock market.PHOTO: AFP

TOKYO (REUTERS) - Asian shares came within reach of testing their 2016 peak on Wednesday (July 13) as prospects of solid US 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 per cent in early trade to 426.62, just below its year-to-date high of 428.22. Japan's Nikkei gained 1.9 per cent.

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 per cent 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 US 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 US 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 Mr Abe's stimulus could be funded by the Bank of Japan's easing.

Such expectations pushed down the yen 4 per cent over the last two days. The yen last traded at 104.67 yen to the US 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 per cent on Tuesday to US$1.3250 as investors bought back the currency on May's appointment as prime minister.

The euro was little changed at US$1.1060.

Oil prices dropped more than one per cent in early Asian trade after industry group American Petroleum Institute (API) reported a surprise build of 2.2 million barrels in US crude stockpiles last week.

Brent crude futures fell 1.0 per cent to US$47.97.

They had surged about 5 per cent 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.