TOKYO: Major Asian markets soared on Wednesday, with Tokyo and Shanghai adding more than 4 percent as upbeat US economic data and China’s fresh stimulus lifted the mood on trading floors, defying a dip in oil prices.
Better-than-expected reports on the sluggish US manufacturing sector, construction spending and auto sales showed the world’s top economy was still resilient even as global growth sputters.
The upbeat figures also put the chances of another Federal Reserve rate rise this year back into play.
Buoyed by a sharply weaker yen, Tokyo’s Nikkei 225 index rocketed 4.1 percent to its best close in a month, while Shanghai ended up 4.3 percent.
Hong Kong added 3.2 percent in late afternoon trade, Seoul closed up 1.60 percent, and Sydney finished 2.0 percent higher.
Australian shares got a boost as official figures showed the economy grew more than expected in the fourth quarter, hinting that the resource-dependent economy is on a recovery track.
“Bets on a US recession or the Fed having to reverse course on rate hikes are quickly coming out of the market,” said Angus Nicholson, a market analyst at IG in Melbourne.
“We have seen an immense . . . rally over the past 24 hours of trade, and a lot of this does look to be underpinned by the stability that oil has found above the $30 level over the past two weeks.”
Market sentiment got a boost as the People’s Bank of China announced on Monday it was cutting the reserve requirement for banks.
The move is aimed at encouraging lending and stimulating activity in the world’s number-two economy, a key driver of global growth.
US economy ‘slow but steady’
The upbeat US figures helped draw investors out of the yen, which is seen as a safe bet in times of turmoil and is watched as a barometer of investor confidence.
“We are getting a bit of stability in markets,” Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors, told Bloomberg News.
“Most of the yen strength is behind us and most of the panic is behind us. People are underestimating just how much ammunition central banks have. US growth is slow but steady.”
Tokyo’s rise came after Japan on Tuesday for the first time sold a new 10-year bond with a yield below zero at a government sale, effectively meaning investors pay Tokyo to lend it money.
The average yield on the bond—its annual return if held to maturity—was minus 0.024 percent.
Japan’s central bank in January shocked markets by unveiling a below-zero interest rate policy as its latest weapon to spur bank lending and drive up inflation.
However, the move was widely panned as desperate, and underscored the challenges facing Prime Minister Shinzo Abe’s limping bid to kickstart Japan’s economy.
On oil markets Wednesday crude for April delivery was down 39 cents at $34.01 a barrel and Brent slipped 16 cents to $36.65 in London.
Oil had closed higher on Tuesday on fresh Russian calls for a production freeze to reduce the global supply glut.
In currency markets, the dollar rose to 114.27 yen from 113.94 yen in New York late Tuesday and 112.72 earlier this week.