Asian stocks extend global rally after strong US data sends Wall Street soaring, STI up 1.35%

A trader looking at stock prices on a screen while working on the floor of the New York Stock Exchange on Aug 26, 2015.
A trader looking at stock prices on a screen while working on the floor of the New York Stock Exchange on Aug 26, 2015. PHOTO: REUTERS

TOKYO (Bloomberg, AFP, REUTERS) - Asian stocks rose for a third day after strong US economic data sent Wall Street flying and extended a global rally that saw a surge in Chinese equities.

The Straits Times Index was trading up 1.35 per cent at 2,985.07 as of 2:38pm.

China's stocks rose for a second day on Friday (Aug 28) amid speculation the government has resumed its intervention in the equities market.

The Shanghai Composite Index climbed 2.8 per cent, paring this week's loss so far to 10.6 per cent. The benchmark index rallied 5.3 per cent on Thursday with all of the gains coming in the last 45 minutes of trading. PetroChina Co. led a rally for energy producers after crude futures soared 10 per cent in New York on Thursday.

China's yuan strengthened the most since March after the central bank boosted the currency's reference rate by the most in five months. The People's Bank of China's daily fixing was set 0.15 stronger at 6.3986 a US dollar on Friday.

"There is a lot of talk of state-linked funds purchasing stocks and helping the market," said Gerry Alfonso, a Shanghai sales trader at Shenwan Hongyuan Group Co. "After the massive correction earlier in the week, investors are apparently starting to realize that the drop was overdone."

Japan's Nikkei index rose 3 per cent to 19,136.32. The benchmark index climbed above its 200-day moving average for the first time in five days but failed to erase all the losses incurred on Monday and Tuesday, ending the week down 1.5 per cent. The broader Topix gained 3.3 per cent to close at 1,549.80, ending the week down by 1.5 per cent.

The Hang Seng Index rose 0.76 per cent, while South Korea's Kospi index gained 1.56 per cent and Australia's S&P/ASX 200 Index closed 0.58 per cent higher.

Wall Street rallied more than 2 per cent on Thursday as strong US economic data and hints that a September interest-rate hike was unlikely fueled optimism that the worst of recent market turmoil was over.

The Dow Jones industrial average scored its biggest two-day percentage gain since 2008, while the S&P 500 and Nasdaq Composite racked up their biggest two-day increases since 2009.

The Dow Jones industrial average surged 2.27 per cent to end at 16,654.77 and the S&P 500 jumped 2.43 per cent to 1,987.66.

The Nasdaq Composite added 2.45 per cent to 4,812.71.

In the past two sessions, the Dow is up 6.3 per cent, the S&P is 6.4 per cent higher and the Nasdaq has gained 6.8 per cent.

Data on Thursday showed US gross domestic product rose at a 3.7 per cent annualized rate, exceeding all estimates of economists surveyed by Bloomberg, and up from the 2.3 per cent reported last month.

"It gave credence to the story that the US economy could be building momentum," said Chris Green, an Auckland-based strategist at First NZ Capital Ltd. "In the world we're looking at now, that is of some comfort. We seem to have gained some sort of stability and people are focusing more on the underlying strength of the US economy."

The data come as Federal Reserve policy makers debate whether growth is strong enough to withstand the first increase in the interest rate since 2006. Central bankers gather at Jackson Hole, Wyoming, for a discussion on inflation just as China's slowdown renews fears of falling prices. Fed chair Janet Yellen won't attend this year.

This three-day rally halted a global selloff that engulfed markets since China devalued its currency on Aug. 11, an unexpected move that ignited concern that the slowdown in the world's second-largest economy may threaten global growth.

"It's been a very volatile week and I'm glad it's over," Green said.