Stocks scale record highs as US government shutdown ends

Pedestrians walk past an electronics stock indicator displaying share prices of the Tokyo Stock Exchange on Jan 4.
Pedestrians walk past an electronics stock indicator displaying share prices of the Tokyo Stock Exchange on Jan 4.PHOTO: AFP

TOKYO (REUTERS) - Asian stocks advanced on Tuesday (Jan 23) after US senators struck a deal to end a three-day government shutdown, sending Wall Street's main indexes to record highs, while the US dollar inched down against the yen after the Bank of Japan kept policy steady.

Spreadbetters expected Britain's FTSE to open 0.3 per cent higher, Germany's DAX 0.5 per cent and France's CAC 0.3 per cent.

US lawmakers passed a short-term measure on Monday to fund the federal government through Feb 8.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.75 per cent to a record peak.

Australian stocks climbed 0.75 per cent and South Korea's KOSPI added 1.1 per cent.

Japan's Nikkei rose to a 26-year peak, Hong Kong's Hang Sang scaled a record high and Singapore was up 0.5 per cent to a 10-year top.

World equity markets have been on a tear over the past year, buoyed by a synchronised uptick in global economic growth in a boon to corporate profits and stock valuations.

The brief US government shutdown put only a minor dent to equities, with Wall Street rallying to all-time highs overnight following the deal to end the impasse in Washington.

In currencies, the dollar briefly dipped 0.33 per cent to 110.550 yen before pulling back to 110.815 for a loss of 0.1 per cent.

In a widely expected move, the BOJ maintained its short-term interest rate target at minus 0.1 per cent and a pledge to guide 10-year government bond yields around zero percent.

The BOJ also said "inflation expectations have moved sideways recently," offering a slightly more upbeat view than three months ago when it said they were on a weak note.

Still, the central bank was nowhere near its peers who were looking for ways out of unconventional monetary policies.

"The BOJ kept is policies unchanged and made no real changes to its overall stance. It still remains a step behind other central banks looking to normalise their policies," said Shusuke Yamada, chief Japan FX strategist at Bank of America Merrill Lynch.

The BOJ caused ripples in the markets earlier in January by slightly reducing the amount of longer-dated Japanese government bonds (JGBs) it buys from the market at its regular debt-purchasing operations.

The yen appreciated significantly against the dollar as some interpreted the BOJ's move as a step towards eventual policy normalisation.

Focus was on BOJ Governor Haruhiko Kuroda's post-policy meeting news conference at 0630 GMT and how he responds to questions about where the central bank stands on its projected policy path.

The euro was effectively flat at US$1.2261 after gaining 0.3 per cent overnight. The common currency was within reach of a three-year peak of US$1.2323 set on Wednesday.

The euro was supported ahead of the outcome of the European Central Bank's meeting on Thursday, which could provide clues to future shifts in the central bank's monetary policy.

The pound was steady at US$1.3983 after touching US$1.3992, its highest level since June 2016's vote for Brexit, on optimism that Britain will reach a favourable divorce deal with the European Union.

The dollar index against a basket of six major currencies stood almost unchanged at 90.369.

Oil prices rose on Tuesday, lifted by healthy economic growth as well as the ongoing supply restraint by a group of exporters around Opec and Russia.

US crude oil futures rose 0.66 per cent to US$63.99 per barrel and Brent gained 0.55 per cent to US$69.40 per barrel .

Spot gold tacked on 0.1 per cent to US$1,336.14 per ounce as the dollar steadied but lacked the momentum to chalk up gains.