Stock rally extends to Asia as higher interest rates seen

A pedestrian walks past an electronic board showing the stock market indices of various countries' outside a brokerage in Tokyo.
A pedestrian walks past an electronic board showing the stock market indices of various countries' outside a brokerage in Tokyo. PHOTO: REUTERS

SYDNEY (BLOOMBERG) - Stocks in Asia advanced as investors bet the global economy can withstand tighter financial conditions as growth picks up.

Banks and technology shares led gains in the MSCI Asia Pacific Index, after the S&P 500 Index rebounded from the biggest selloff in six weeks. Bank of America, Citigroup and JPMorgan Chase & Co all climbed in after-hours trading after lifting dividends and buying back shares. The pound built on recent gains as Bank of England chief Mark Carney said rates may need to rise soon. The loonie had also climbed as Canada's Stephen Poloz reiterated he's considering tighter policy.

This week has seen central bankers from Europe to the US affirm to investors that interest rates are heading higher, triggering pronounced moves in currency markets and lending support to equity investors willing to believe in an expansion of global economic growth. Concerns about the relative strength of America's economy have dragged the Bloomberg dollar index down more 6 per cent this year at the same time that global equities surged 11 per cent.

The US financial sector saw gains after the New York close of regular trading as all 33 banks received the greenlight from the Federal Reserve for capital return plans.

Futures on the S&P 500 Index added 0.2 per cent of 9:17am in Tokyo. The underlying gauge rose 0.9 per cent, bouncing back from a loss of 0.8 per cent. It's on pace for a quarterly gain of 3.3 per cent, the seventh straight advance.

The Nasdaq Composite Index jumped 1.4 per cent, while small caps in the Russell 2000 Index rallied 1.5 per cent, the most since June 1.

Japan's Topix index gained 0.7 per cent. Australia's S&P/ASX 200 Index rose 0.6 per cent and the Kospi index advanced 0.6 per cent. Futures on Hong Kong's Hang Seng Index climbed 0.6 per cent.

The Bloomberg Dollar Spot Index held two days of losses at the lowest since October. The yen was steady at 112.30 per dollar.

The euro traded at US$1.1381, near the highest level in a year. The shared currency surged 1.4 per cent on Tuesday then had a tumultuous Wednesday session amid speculation investors misjudged comments from European Central Bank President Mario Draghi. More of that story here.

The pound climbed 0.1 per cent to US$1.2941, heading for a seventh straight day of gains.

WTI futures advanced 0.1 per cent, extending a 1.1 per cent advance from the previous session. Prices gained as government data showed a drop in US gasoline supplies that have remained stubbornly high at the start of the summer driving season.

Gold rose less than 0.1 per cent to US$1,250.17 an ounce.