Asian stocks (MXAP) rallied, South Korea’s won jumped the most in four weeks and the dollar held at a one- week low after central banks took steps to ease Europe’s debt crisis and support economic growth.
The MSCI Asia Pacific Index rose 3.5 percent at 1:40 p.m. in Tokyo, set for its largest increase since Sept. 27. Standard & Poor’s 500 Index futures gained 0.2 percent, following the stock gauge’s 4.3 percent surge yesterday. China’s interest-rate swaps sank to the lowest level in a year. The won strengthened as much as 1.8 percent and the Dollar Index dropped as much as 0.2 percent. Oil traded above $100 a barrel in New York.
Six central banks led by the Federal Reserve agreed to cut the cost of providing dollar funding via swap agreements and to make other currencies available as needed. The People’s Bank of China cut banks’ reserve requirements yesterday for the first time since 2008, while a purchasing managers’ index signaled the first Chinese manufacturing contraction since February 2009.
“The global monetary policy backdrop is turning more favorable,” David Joy, the Boston-based chief market strategist at Ameriprise Financial Inc., said in the Bloomberg Television interview. “This is all in the context of undervalued markets, so there are some good things happening but the key ingredient remains Europe and what happens there.”
Almost nine shares gained for each one that declined on MSCI’s Asia Pacific Index, helping the gauge extend a three-day, 4.3 percent advance. Japan’s Nikkei 225 Stock Average added 2.4 percent, South Korea’s Kospi Index rallied 4.1 percent and Hong Kong’s Hang Seng Index surged 5.9 percent. The Shanghai Composite Index rose 3.4 percent, on course for its biggest increase since May 2010.
Banks, Developers
Commonwealth Bank of Australia (CBA) advanced 2.8 percent in Sydney, pacing gains among lenders. Evergrande Real Estate Group Ltd. (3333), China’s second-biggest developer by sales, jumped 14 percent in Hong Kong.
The S&P 500 rounded off its steepest three-day rally since March 2009, while the VIX (VIX), as the Chicago Board Options Exchange Volatility Index is known, dropped 9.3 percent yesterday to a three-week low. The premium banks pay to borrow dollars overnight from central banks will fall by half a percentage point to 50 basis points, the Fed said yesterday in a statement. The so-called dollar swap lines will be extended by six months to Feb. 1, 2013.
Treasury 10-year yields increased eight basis points to 2.07 percent yesterday. The rate was at 2.06 percent today. The Fed said in its Beige Book survey yesterday the economy expanded at a “moderate” pace in 11 of 12 districts, led by gains in manufacturing and consumer spending.
The Beige Book reinforced the Fed’s view that the U.S. economy, while strong enough to skirt a recession, remains too weak to bring down anunemployment rate stuck near 9 percent or higher for more than two years. The government is scheduled to release payroll figures for November tomorrow.
The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, was little changed after a three- day decline. The gauge has dropped 1.7 percent this week. The dollar was little changed against the euro at $1.3451 and fetched 77.66 yen, compared with 77.62 yesterday in New York.
Spain and France are scheduled to sell bonds today. The European Central Bank holds its next policy meeting on Dec. 8, and regional heads of government will meet the following day in Brussels.
Currency Gains
The won traded at 1,127.15 per dollar, strengthening for a fourth day. The Taiwan dollar rose 0.8 percent to NT$30.114 and Thailand’s baht advanced 0.7 percent to 30.93. The yuan appreciated 0.3 percent to 6.3618 and China’s one-year swap contract, the fixed rate that can be exchanged for the floating seven-day repurchase rate, fell 18 basis points to 2.85 percent.
The People’s Bank of China yesterday said reserve ratios will decline by 50 basis points effective Dec. 5. The move may add 350 billion yuan ($55 billion) to the financial system, according to UBS AG. The Purchasing Managers’ Index fell to 49.0 in November from the previous month’s 50.4, the China Federation of Logistics and Purchasing said today. The median estimate in a Bloomberg News economist survey was 49.8. A level above 50 indicates expansion.
“The cut in the reserve ratio requirement is significant and signals Beijing is pivoting towards supporting growth,” Stephen Green, Hong Kong-based head of Greater China research at Standard Chartered Plc, said on Bloomberg Television. “As soon as the banks can lend a bit more, that should feed into the small and medium enterprises. That’s where the economy is beginning to seize up.”
Copper, Oil
Brazil yesterday cut borrowing costs for a third-straight meeting, joining Israel and Thailand in lowering interest rates this week.
Three-month copper decreased as much as 1.3 percent to $7,781.50 a metric ton on the London Metal Exchange, after prices surged 5.3 percent yesterday, the most since Oct. 27. Zinc slumped 2.1 percent, the first retreat in five days, while aluminum declined 1.1 percent.
Oil for January delivery rose 0.3 percent to $100.70 a barrel in New York. Rubber jumped as much as 6.8 percent to 285.7 yen a kilogram ($3,684 a metric ton) in Tokyo, the biggest gain since Nov. 14.
The cost of insuring Japanese corporate bonds against non- payment declined, with the Markit iTraxx Japan index dropping 10 basis points to 195 basis points, Deutsche Bank AG prices show. That would be the biggest decline since Oct. 28, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
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