WElLINGTON (Bloomberg) - Fresh U.S. equity records lit a fire under the Asian market, with benchmarks from Tokyo to Sydney extending gains as bond yields declined ahead of policy updates from two of the world's biggest central banks.
The regional Asian stock index rose to a more than one-month high as banks drove Australia's S&P/ASX 200 Index to its highest level since August and Japanese shares jumped. The euro and the yen maintained gains with gold ahead of Thursday's European Central Bank decision, amid mounting speculation policy makers will prolong the euro-zone's asset-buying programme. The New Zealand dollar and Korean won strengthened. Yields on Australian bonds fell to their lowest level this month amid a debt rally across developed markets. Oil nudged US$50 a barrel after a surge in U.S. stockpiles.
Expectations the ECB chief Mario Draghi will prolong the bank's bond program buying beyond March provided a shot in the arm for U.S. equities, which had been struggling to extend the rally ignited by Donald Trump's unexpected election win a month ago. Both the S&P 500 Index and the Dow Jones Industrial Average rose to fresh records Wednesday, with investors positioning for a continuation of the ECB's monthly asset purchases of 80 billion euros. Odds on the Federal Reserve tightening policy further by hiking interest rates remain wedged at 100 percent, according to Fed funds futures.
"There is a real risk of unpleasantness in European bond, equity and currency markets if Draghi doesn't at least meet expectations," said Sharon Zollner, a senior economist in Auckland at ANZ Bank New Zealand. "The market is optimistic that the ECB will extend its quantitative easing program at current levels for a further six months." As well as the ECB review, markets will be digesting an update on Chinese trade data, while Bank of Japan Governor Haruhiko Kuroda will speak at a party for economists. Final third-quarter data showed Japan's economy expanded less than was projected, growing an annualised 1.3 percent after economists predicted a rate of 2.3 percent.
The MSCI Asia Pacific Index climbed by 0.8 percent as of 10:01 a.m. Tokyo time, rising for a third day as Japan's Topix index gained 1.1 percent.
Banks and mining companies drove the S&P/ASX 200 up 1.2 percent in Sydney, set for its highest close since Aug. 24. New Zealand's S&P/NZX 50 Index added 0.2 percent after falling last session.
Futures on the Hang Seng Index in Hong Kong climbed more than 0.4 percent with those on the Hang Seng China Enterprises Index in most recent trading, while contracts on the FSTE China A50 Index gained 0.3 percent.
S&P 500 Index futures were little changed at 2,232.
Telephone and property stocks drove the S&P 500 to its new all-time high Wednesday, with health-care shares the only decliners among 10 industry groups after President-elect Trump said that he opposed high drug prices.
The euro was steady at US$1.0757 after gaining 0.3 percent last session, while the yen held at 113.81 per US dollar following a 0.2 percent advance.
The kiwi climbed 0.5 percent, touching an almost four-week high, as Reserve Bank of New Zealand Governor Graeme Wheeler said he was likely done with rate cuts and the government raised growth projections.
The won added 0.6 percent in a third rising day.
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was little changed after swinging between gains and losses all week.
Australian 10-year bonds led the advance in Asia, with yields falling by six basis points, or 0.06 percentage point, to 2.74 percent.
Similar maturity New Zealand debt yielded 3.20 percent, down five basis points.
Yields on Treasuries due in a decade rose by one basis point to 2.35 percent after falling by five basis points on Wednesday.
West Texas Intermediate crude edged up by 0.6 percent to $50.05 a barrel after sliding 2.3 percent last session.
Oil supplies at Cushing, Oklahoma, the biggest U.S. storage hub, climbed by the most since 2009 last week, fueling concern that American shale producers will fill the gap created by the OPEC-led deal to curb output.
Gold for immediate delivery rose 0.2 percent to US$1,176.33 an ounce after gaining 0.4 percent on Wednesday.