Asia stocks reach record highs after Wall Street surge, US dollar edges back

A man walks past a panel displaying the fresh closing peak Hang Seng Index in Hong Kong on Jan 17, 2018.
A man walks past a panel displaying the fresh closing peak Hang Seng Index in Hong Kong on Jan 17, 2018. PHOTO: REUTERS

TOKYO (REUTERS) - Asian stocks struck record highs on Thursday (Jan 18), with a rally by Wall Street supporting bullish investor sentiment, while the dollar pulled back from three-year lows as comments by European Central Bank officials tempered the euro's recent rally.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 per cent, building on the previous day's gains to make a fresh peak.

Australian stocks were flat, South Korea's KOSPI added 0.2 per cent and Japan's Nikkei was last up 0.4 percent after reaching its highest level since late 1991.

Shanghai rose 0.4 per cent and Hong Kong's Hang Seng advanced 0.4 per cent.

Singapore's Straits Times Index was up 0.14 per cent at 3,546.84.

US stocks jumped on Wednesday and the Dow closed above 26,000 for the first time as investors' expectations for higher earnings lifted stocks across sectors.

Optimism over prospects for sustained strong global growth and improved corporate earning shave helped share markets rally at the start of 2018.

"Events related to North Korea pose potential risks, but there are very few factors holding equities back at the moment," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

"And bullish US stocks, higher Treasury yields and signs of the euro's recent surge running its course are all dollar-supportive factors," Ishikawa said.

Near-term market focus was on China's gross domestic product data due at 0700 GMT. Analysts polled by Reuters expect the world's second-largest economy to have grown 6.7 per cent in the October-December quarter from a year earlier, slowing from a rise of 6.8 per cent in the previous quarter.

"The downward trend is clear. We expect investment to come under pressure this year but we are relatively optimistic about consumption and exports," said Li Huiyong, an economist at Shenwan Hongyuan Securities in Shanghai.

The dollar index against a basket of six major currencies was 0.4 per cent higher at 90.878 after pulling back overnight from a three-year low of 90.279 set earlier in the week.

The euro was little changed at US$1.2188, slipping from a three-year peak above $1.2300 after some ECB officials voiced worries about the currency's strength. The common currency had advanced this month on expectations that the central bank would take steps towards winding back on stimulus measures to normalise monetary policy.

The dollar was steady at 111.310 yen after surging 0.75 per cent overnight, when it bounced from a four-month low of 110.190.

The Australian dollar dipped slightly to US$0.7959 after being nudged off a four-month high of US$0.8023 the previous day.

The two-year Treasury yield hovered near a nine-year high of 2.051 per cent reached on Wednesday on expectations the Federal Reserve will continue to tighten monetary policy this year.

In commodities, crude oil prices extended gains on data showing a decline in US crude inventories.

Brent crude futures rose 0.15 per cent to US$69.50 a barrel. On Monday, they hit a three-year high ofUS$70.37.

US crude futures were 0.4 per cent higher at US$64.21 per barrel.

Despite the gains, many analysts are warning that the recent oil price rally may lose momentum.

"We reckon that the upside is now limited for oil prices. US shale oil output will increase by a good 111,000 barrels per day (bpd) next month to 10 million bpd, and will rise to about 11 million bpd by the end of next year," said Fawad Razaqzada, market analyst at future brokerage Forex.com.

"This would put the US on par with Saudi Arabia and Russia's output," Razaqzada said.

Spot gold was down 0.25 per cent at US$1,326.50 an ounce, with the dollar's bounce pulling it back from a four-month high of US$1,344.43 set on Monday.