HONG KONG: Tokyo led Asian markets higher on Tuesday as exporters were lifted by a weakening yen, while tighter Chinese inflation data also provided some cheer.
However, gains were tempered by losses in energy firms after a slump in crude prices as the wildfires sweeping Canada’s oil-sands region abated.
Japanese stocks advanced for a second day as the dollar made up more ground against the yen after Friday’s US jobs report provided hope for the economy but was weak enough to suggest any Federal Reserve interest rate hike would be gradual.
Japanese officials continued to try to talk down the currency, with finance minister Taro Aso repeating warnings about possible intervention.
The Nikkei index closed 2.2 percent higher while the dollar climbed to 108.93 yen, up from 108.34 yen in New York and sharply higher than the 105.50 yen troughs touched last Tuesday.
Toshihiko Matsuno, chief strategist at SMBC Friend Securities, told Bloomberg News:
“We’re more likely to see a weakening yen this week. The Japanese currency has fallen to within the levels assumed for it by exporters, so investors will be able to buy the shares again.”
Shanghai reversed early losses to end marginally higher after inflation came in above two percent again last month while the fall in prices paid at factory gates also eased.
The figures provided some small hope for the world’s number two economy after weekend data showed another fall in exports and imports.
“We are witnessing a reversal of the deflation process,” Larry Hu, head of China economics at Macquarie Securities in Hong Kong, wrote in a recent note. “While deflation is very painful, the reversal of it could also lead to higher nominal growth and inventory restocking.”
Among other markets, Sydney ended up 0.4 percent and Seoul added 0.8 percent. Hong Kong climbed 0.4 percent.
Hopes that European leaders will agree to a deal to release fresh bailout cash to Greece also provided some cheer after Greece’s parliament voted for more pension cuts and tax hikes.
Oil prices bounced back in the afternoon, having plunged Monday as the biggest threat to Canada’s reserves seemed to be over with rain and cooler temperatures slowing fires that have raged for more than a week.
The Brent crude contract rose 0.9 percent in Asia having lost almost four percent Monday while West Texas Intermediate gained 0.4 percent the day after a 2.7 percent loss.
In early European trade London gained 0.6 percent, Frankfurt added 0.8 percent and Paris was up 0.4 percent.