STORE

Asia markets mostly up as traders extend last week’s rally

News that Germany's centre-left Social Democrats had voted to hold coalition talks with Chancellor Merkel's conservatives has fuelled hopes of an end to months of uncertainty
AFP

Hong Kong (AFP) – Asian equities reversed early losses Monday and built on last week’s rallies, while the the euro was boosted by hopes Chancellor Angela Merkel will be able to form a new German government.

While a shutdown of the US government looks unlikely to be resolved immediately, analysts said investors remained upbeat due to the strong global economic outlook and healthy corporate earnings.

The morning saw a more cautious tone after Hong Kong hit new highs and Tokyo’s Nikkei cracked 24,000 for the first time in 26 years.

However, with the earnings season about to go into full swing and data showing economies across the globe continuing to improve, prices rebounded in most of the region in the afternoon.

Hong Kong closed up 0.4 percent at a new record and Shanghai also added 0.4 percent. Tokyo finished slightly higher on late bargain-buying.

Singapore gained 0.2 percent, while Wellington, Manila and Taipei tacked on healthy gains.

However, Sydney eased 0.2 percent and Seoul lost 0.7 percent.

In early European trade London fell 0.3 percent and Paris shed 0.2 percent but Frankfurt added 0.1 percent.

There was little concern over the midnight Friday shutdown of the US government after lawmakers failed to agree a funding bill. Democrats in the Senate held out for Republican concessions on immigration issues.

The two sides remain locked in talks to resolve the issue but expectations are for the shutdown to continue for some time, with a planned vote on Sunday evening delayed until noon Monday.

– German breakthrough –

Still, analysts were not too concerned for the time being.

“Due to the limited economic impact, markets should be largely unaffected,” Poul Kristensen, portfolio manager at New York Life Investment Management, told Bloomberg News.

“If there is a little pullback, we believe it will be a buying opportunity. The last time the government shut down in 2013, markets moved higher.”

On currency markets the dollar continues to struggle, with the euro supported by news that Germany’s centre-left Social Democrats had voted to hold coalition talks with Merkel’s conservatives.

A deal would end months of uncertainty in Europe’s biggest economy.

“By accepting to pursue further discussions and thereby dramatically improving the chances for another grand coalition, a temporary calm should engulf the EU political landscape,” said Stephen Innes, head of Asia-Pacific trading at OANDA.

The pound edged up on hopes Britain will be able to leave the European Union on better terms than initially expected after French President Emmanuel Macron said a special post-Brexit trade agreement was possible.

Possible market-moving events this week include meetings at the European Central Bank and Bank of Japan, which will be closely watched for signs of further policy tightening, while Donald Trump is due to speak at the Davos economic forum.

Oil prices edged up on tensions in the crude-rich Middle East after Turkey sent troops and tanks into Syria on Sunday to push an offensive against Kurdish militia.

The commodity has also been supported by weekend comments from Saudi Arabia’s Energy Minister Khaled al-Faleh, that OPEC and Russia had agreed to extend cooperation beyond 2018.

The oil giants have kept a lid on output as part of a drive to support the market, though al-Faleh said any new agreement did not necessarily mean production would remain frozen.

– Key figures around 0820 GMT – 

Tokyo – Nikkei 225: FLAT at 23,816.33 (close)

Hong Kong – Hang Seng: UP 0.4 percent at 32,393.41 (close)

Shanghai – Composite: UP 0.4 percent at 3,501.36 (close)

London – FTSE 100: DOWN 0.3 percent at 7,711.42

Euro/dollar: UP at $1.2231 from $1.2225 at 2200 GMT on Friday

Pound/dollar: UP at $1.3886 from $1.3860 

Dollar/yen: UP at 110.81 yen from 110.77 yen

Oil – West Texas Intermediate: UP eight cents at $63.45 per barrel

Oil – Brent North Sea: UP 20 cents at $68.81 per barrel

New York – DOW: UP 0.2 percent at 26,071.72 (close)

.