Friday, September 17, 2010

World stocks try 3rd week of gains with risk

HONG KONG: Global stock markets were on track for a third week of gains and high-yielding currencies strengthened on Friday, Sept 17 while the threat of Japanese intervention kept the yen close to its low for the month against the dollar.

European stock markets climbed at the opening, with the leading European stocks up +0.78 percent in early trade.

Japanese stocks posted the largest weekly gain of the year following Tokyo's aggressive yen selling on Wednesday, which may have totalled as much as 1.9 trillion yen, and repeated pledge to do more if necessary.

Still, that has been catch up with other advanced markets, which have also been rising in September, after underperforming during most of the current quarter.

The Nikkei share average led Asian markets, finishing 1.2 percent higher on the day and up 4.2 percent this week, the biggest weekly gain since December 2009, after yen selling intervention brightened the prospects of exporters.

"In addition to the fact that investors aren't still entirely sure about the outlook for the global economy, they are also closely watching whether there would be any comments from the United States on Japan's currency intervention," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities in Tokyo.

The MSCI index of Asia Pacific shares outside Japan rose 1.2 percent, with buying spread out across the energy, materials and TECHNOLOGY [] sectors.

The MSCI all-country world stocks index was up 1.9 percent so far this week, on track for the third week of gains. Emerging market stocks, up 2.6 percent in the week, have been a big contributor.


China also set the mid-point of the yuan's daily trading range at a new high for the sixth consecutive day. This came on the heels of U.S. Treasury Secretary Timothy Geithner's vow to the U.S. Congress to rally other world powers to push Beijing to move faster on the yuan.

China's guiding hand to lift its currency has been a signal for other Asian policymakers earlier in the year to allow their own currencies to strengthen.

However, Japan's intervention this week along with stepped up efforts by officials in Asia and Latin America to fight their own currencies from appreciating appear to have halted the trend, at least for now.

"Policy bias across Asia ex-Japan (AXJ) is still for monetary tightening. In Japan, the focus is still on the extent and means of further monetary easing," Standard Chartered currency strategists said in a note.

"We view these extremely elevated levels in yen vs AXJ currencies as a strategic buying opportunity in AXJ now that the risk-reward dynamics in USD-JPY appear to have changed."

In currency markets, the U.S. dollar was nearly unchanged on the day at 85.70 yen, still within spitting distance of its overnight high around 85.93 yen. Japanese exporters may sell dollars near 86 yen, putting a lid on dollar strength.

"The real key positioning is probably what the corporates and Japanese investors need to do and I think there are still corporates out there that need to sell," said Greg Gibbs, currency strategist at Royal Bank of Scotland in Sydney.

The euro rose 0.4 percent to $1.3132 to a one-month high, lifted by long-term investors encouraged after auctions on Thursday of 10- and 30-year Spanish government bonds produced lower yields than a previous sale in June.

Higher-yielding currencies such as the Australian dollar also rose as stock markets steadily increased during the session and commodity prices gained.

The yield on the 10-year U.S. Treasury note was largely unchanged on the day at 2.77 percent after climbing 4 basis points on Thursday after a drop in initial jobless claims.

Still, the spread of the U.S. 10-year yield over the same maturity Japanese government bond has widened 7 basis points this week, helping Japan's cause to pull down the yen.

Gold rose 0.5 percent to a record high of $1,277.75 an ounce. The precious metal usually associated with safety had advanced earlier in the week on speculation the Federal Reserve would have to ease policy further, but the persistent gains suggest the rally has taken on a life of its own. - Reuters

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