INSUBCONTINENT EXCLUSIVE:
SYDNEY: Asian shares sped ahead on Monday as a dovish turn by Federal Reserve and startlingly strong US jobs data soothed some of market's
worst fears about global outlook.
Chinese stocks firmed after country's central bank announced an easing in policy on Friday, with 100
basis points of cuts to bank reserve requirements freeing up around $116 billion for new lending.
"This year we might reasonably expect to
see as many as four 100 basis point (reserve requirement ratio) cuts and, in absence of capital outflow pressures on currency, quite
possibly cuts to benchmark one-year lending rate as well," said NAB head of FX strategy Ray Attrill.
Chinese officials also meet their US
counterparts for trade negotiations starting later Monday, first face-to-face talks of year.
US President Donald Trump said on Sunday that
talks were going very well and that weakness in Chinese economy gave Beijing a reason to work towards a deal.
Shanghai blue chips rose 0.3
per cent, having already climbed over 2 per cent on Friday
MSCI's broadest index of Asia-Pacific shares outside Japan put on 1.3 per cent.
Japan's Nikkei shot up 3.1 per cent, helped in part by a
pullback in yen, while South Korea added 1.5 per cent
E-Mini futures for SP 500 climbed another 0.4 per cent.
Risk appetite got a huge boost on Friday when US payrolls report showed 312,000 net
new jobs were created in December, while wages rose at a brisk annual pace of 3.2 per cent.
Despite strength, Federal Reserve Chairman
Jerome Powell sought to ease market concerns about risk of a slowdown, saying central bank would be patient and flexible in policy decisions
this year.
Markets had already gone much further to price in a major chance of a cut in rates this year, and some of that exuberance was
tempered by Powell's emphasis on word "patient" in his speech on Friday.
Yet, Fed fund futures still implied a rate of 2.33 per cent by
December, compared to current effective rate of 2.40 percent.
Yields on two-year Treasuries rose to 2.49 per cent, from a trough of 2.37 per
cent, but were still below those on one-year paper.
Powell has another speech on Thursday to expand on his thinking, while there are at
least eight other Fed officials scheduled to speak this week.
'Extreme Bear' The combination of a strong jobs report and a dovish Fed helped
Dow end Friday with gains of 3.29 per cent while SP 500 jumped 3.43 per cent and Nasdaq 4.26 per cent.
Analysts at Bank of America Merrill
Lynch noted that global equity markets had lost $19.9 trillion since January last year, and a record $84 billion had flowed out of stocks in
just past six weeks.
With 2,055 of 2,767 US and global companies in a bear market, it might be time to buy.
"Our Bull Bear Indicator has
fallen to an 'extreme bear' reading, triggering first 'buy' signal for risk assets since June 2016," they wrote in a note.
BofAML saw upside
in Chinese and German stocks, US small cap stocks, semi-government debt, energy stocks, US dollar and euro high-yielding bonds and emerging
market currencies.
The latter had already received a boost from news Sino-US trade talks were back on, as well as a natural bounce from wild
"flash crash" that rocked markets last week.
The effect was apparent in Australian dollar, which is often used as a liquid proxy for
emerging markets and China risk
The Aussie was up at $0.7124 on Monday, having briefly dived as deep as $0.6715 last Thursday.
The safe-haven yen gave up much of its recent
gains to stand at 108.50 per dollar, having gotten as far as 105.25 last week
The euro was firmer at $1.1413 while dollar index eased a touch to 96.102.
Gold benefited from diminished risk of US rate hikes and held at
$1,287.78, just off a six-month top.
Oil prices started firmer after Brent bounced about 9.3 per cent last week while WTI rose 5.8 per
cent.
The crude benchmark rose 54 cents on Monday to $57.61 a barrel while US crude futures gained 53 cents to $48.49.
