By Ankur Banerjee
SINGAPORE (Reuters) – Asian stocks rose on Thursday as investors held out hope that trade tensions could ease after U.S. President Donald Trump exempted some automakers from tariffs for a month, while the euro stood tall ahead of the European Central Bank’s meeting.
Japanese government bonds fell sharply after German long-dated bonds were swept up in their biggest sell-off in decades as the parties in talks to form Germany’s new government agreed to try to loosen fiscal rules.
Japan’s 10-year government bond yield, which moves inversely to prices, hit a near 16-year high, while Australian bond yields rose 12 basis points. The yield on benchmark U.S. 10 year Treasury notes rose 5 bps in Asian hours.[JP/]
“The German news is a shock,” said Mansoor Mohi-uddin, chief economist at Bank of Singapore. “Asian government bond yields are rising as investors realise geopolitical tensions may cause governments across the region to also increase spending on defence.”
Much of the focus in markets remains on an escalating global trade war after 25% tariffs on imports from Mexico and Canada were imposed on Tuesday along with fresh duties on Chinese goods, sparking fears about economic growth.
But on Wednesday, the White House said Trump would exempt automakers from his 25% tariffs on Canada and Mexico for one month as long as they complied with existing free trade rules.
That led U.S. stocks sharply higher, shoring up Asian markets. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1.2%, while Tokyo’s Nikkei gained 0.9%.
Futures indicate European markets are set for a higher open as well, with pan-European STOXX 50 futures up 0.7% and Germany’s DAX futures 0.3% higher.
“Obtaining any kind of reliable signal from the headlines is almost impossible,” said Chris Weston, head of research at Pepperstone.
“One must truly feel for those businesses that need to plan ahead – with tariff policy changing almost daily, the ability to have any sort of confidence to make strategic decisions is currently almost impossible – this will have implications.”
China and Hong Kong shares rose on Thursday, a day after Beijing set an ambitious economic growth target and vowed more support for domestic consumption and the technology industry as a trade war with the United States ratchets up.
China’s blue-chip index rose 1% while Hong Kong’s Hang Seng Index surged nearly 3%, hitting its highest level in three years. The Hang Seng is up 20% so far this year, by far the best performing major stock market in the world.
ECB DAY
Investor focus on Thursday will be on the ECB meeting, where it is widely expected to cut interest rates again as policymakers contend with trade war woes and a rearmament focus in the region.
The meeting comes a day after the euro jumped 1.5% and German bonds were sold off as the parties in talks to form Germany’s new government agreed to create a 500 billion euro ($540.70 billion) infrastructure fund and to overhaul borrowing rules.
German 10-year Bund futures fell 0.7% on Thursday, indicating a likely decline in cash bond prices later. On Wednesday, the 10-year yield, the euro zone’s benchmark, climbed more than 30 basis points, in its biggest daily rise in roughly 28 years.
The euro rose 0.25% to $1.0815, just shy of the four-month peak touched in early Asian hours. The single currency is on course for a rise of more than 4% this week, its strongest weekly performance since March 2009.
“Is it the gamechanger that switches Germany from a drag on activity to an engine of growth? It won’t be a magic bullet, but it is definitely a step in the right direction,” said Kyle Chapman, FX markets analyst at Ballinger Group.
The dollar index, which measures the U.S. currency against six other units, eased to 104.11, touching its lowest level since early November.
In commodities, gold prices were steady at $2,921.39 per ounce as traders await the U.S. non-farm payrolls report on Friday for cues on the Federal Reserve’s policy path. [GOL/]
Oil prices tried to catch a break after stumbling in the previous sessions this week, undermined by a larger than expected jump in U.S. crude stocks, OPEC+ plans to increase output and U.S. tariffs on key oil supplies.
Brent futures hovered close to an over three-year low touched on Wednesday. [O/R]
($1 = 0.9247 euros)
(Reporting by Ankur Banerjee; Editing by Shri Navaratnam and Jamie Freed)
