SYDNEY (BLOOMBERG) - Asian stocks gained, following advances in US and European equities, while bonds slipped as investors looked past geopolitical events to the prospects of faster US economic growth. Oil extended its advance.
Stock gauges from Japan to Australia advanced on Wednesday (Dec 21) after the Dow Jones Industrial Average closed at a record and the Stoxx Europe 600 Index reached its highest level this year. The yen traded close to the weakest since February versus the dollar after Japan's central bank kept its yield-curve and asset-purchase programmes unchanged. Treasuries and gold reversed gains from Monday that had come following an attack that left 12 people dead in Berlin and the killing of Russia's envoy to Turkey. Oil jumped above US$53 a barrel as data showed US stockpiles declined last week.
Markets are showing resilience to terror incidents, with investors choosing instead to focus on the likelihood of increased US government spending that has buoyed equities and pummeled bonds since Mr Donald Trump won the Nov 8 presidential election. Trading volumes are thinning out ahead of the December holidays and year-end. A so-called fear gauge of volatility in European stocks was at the lowest since 2014.
"Noteworthy is the resilience of equity markets and low volatility in the face of two horrific terrorist attacks in Europe," Mr Jason Wong, a currency strategist at Bank of New Zealand in Wellington, wrote in a note to clients on Wednesday (Dec 21). "They seem to have had little impact on the market."
The Bank of Japan kept its yield-curve and asset-purchase programmes unchanged at its last meeting of the year on Tuesday and forecast a moderate recovery trend to continue amid a pickup in exports, better business sentiment and resilience in private consumption.
Japan's Topix climbed 0.3 per cent as of 9.53am in Tokyo, extending gains after erasing losses for 2016. Australia's S&P/ASX 200 Index and New Zealand's S&P/NZX 50 Index each gained 0.6 per cent, with Sydney shares at the highest in more than a year, South Korea's Kospi index added 0.4 per cent to the highest level since October.
Futures on the S&P 500 Index were little changed. The gauge rose 0.4 per cent to 2,270.76 on Tuesday, a point below its all-time high. The Dow rose 91.56 points to close at an unprecedented 19,974.62. Trading in S&P 500 and Dow stocks was at least 20 per cent lower than the 30-day average as investors prepare for the Christmas holiday.
The Bloomberg Dollar Spot Index was flat. The measure's gain for the quarter is 7.6 per cent, heading for the biggest three-month advance since the third quarter of 2008. The yen fell 0.7 per cent to 117.86 versus the dollar in New York on Tuesday and was at 117.93 in early trading on Wednesday.
Treasuries slumped with European debt, erasing some of Monday's gains Yields on 10-year Treasury notes climbed for a second day, adding one basis points to 2.57 per cent, after dropping five basis points on Monday. Yields on Australian 10-year bonds rose two basis points to 2.87 per cent, while those in New Zealand increased two basis points to 3.45 per cent.
Gold slipped 0.1 per cent to US$1,131.39 an ounce after closing near a 10-month low on Tuesday as concerns eased over geopolitical events that had briefly supported the price.
Oil climbed 0.5 per cent to US$53.59. Crude inventories dropped by 4.15 million barrels, the American Petroleum Institute was said to report. Data from the Energy Information Administration on Wednesday is also forecast to show supplies shrank.