Asian markets higher in relief rally

Asian markets surged yesterday and the euro rose after pro-austerity parties came out on top in Greek elections, easing but not ending concerns over whether the country will stay in the single currency.

The results were also welcomed by the governments of Japan and China – two of Europe’s biggest creditors – which called for leaders in Greece to act quickly to form a cabinet.

Tokyo stocks rose 1.77 percent. The Nikkei 225 Index gained 151.70 points to 8,721.02, its best close in nearly a month.

Kenichi Hirano, operating officer at Tachibana Securities, told Dow Jones Newswires that the election results were “a net buy incentive for stocks” but added that “Greece’s problems are far from over”.

Another area of concern was whether European policymakers can forge a framework to support the continent’s hard-hit banks, brokers said.

Chinese shares closed up 0.40 percent. The Shanghai Composite Index added 9.20 points to 2,316.05.

“Greece’s election results helped boost market confidence, but investors remained cautious due to worries that China’s economy may not achieve ideal growth in the first half,” Zhang Qi, an analyst at Haitong Securities, said.

Sydney was 1.96 percent higher, or 79.6 points, at 4,136.9, while Seoul climbed 1.81 percent, ending up 33.55 points at 1,891.71.

HONG KONG: Shares rose 1.01 percent yesterday to close at their highest level in a month after Greek pro-austerity parties won enough votes to form a government, easing concerns that Athens could exit the eurozone.
The benchmark Hang Seng Index jumped 193.87 points to 19,427.81, its highest close since May 15. Blue chips’ gains were wide, with 44 out of 49 ending higher.
“There is a mixture of both fresh buying and short-covering in Hong Kong, investors have been pricing in a lot of negativity,” said Hong Hao, Bank of Communications International Securities’ chief equity strategist.

SINGAPORE: Most Southeast Asian stock markets rose yesterday as Greek election results helped boost investor confidence, easing the fear of Europe’s currency bloc breaking up amid the lingering eurozone debt crisis.
In Singapore, the benchmark Straits Times Index gained 0.47 percent or 13.22 points to 2.824.22.
“We have a temporary relief that it is not a worse case scenario. But the (eurozone) problem is not over,” said Song Seng Wun, an economist at CIMB, based in Singapore. “We don’t know how much time it will buy as the outlook of the other troubled countries like Spain and Portugal has not changed.”

KUALA LUMPUR: Share prices on Bursa Malaysia closed firmer yesterday as investors took their cue from the uptrend on regional bourses.
The favourable outcome of the general election in Greece, which saw pro-bailout political parties winning an adequate number of parliamentary seats to form a new government, served as a positive impetus for regional equity markets, dealers said.
Gains in heavyweights like British American Tobacco, Petronas Chemicals and Telekom Malaysia pushed the FTSE Bursa Malaysia KLCI (FBM KLCI) to close 3.5 points higher at 1,582.73. The benchmark index, which opened at 1,583.35, fluctuated between 1,582.25 and 1,588.54 throughout the day.

In other markets:

* Taipei rose 1.76 percent, or 125.67 points, to 7,281.50.

* Manila rose 2.43 percent, or 119.78 points, to 5,050.41.

* Jakarta rose 42.05 points, or 1.1 percent, closing at 3,860.16.

* Bangkok edged down 0.20 percent or 2.32 points to 1,163.41.

* Mumbai fell 1.44 percent, or 244.00 points, to 16,705.83.

EUROPE: European shares extended their fall to a session low yesterday, led by weakness in banking stocks and the national indices of Spain and Italy as early relief around the Greek election result dissipated further.

At 1253 GMT, the FTSEurofirst 300 index was down 0.3 percent at 990.09 points, led by falls of 2.9 percent and 2.6 percent, respectively, for Spain’s IBEX and Italy’s FTSE MIB.

Concerns over the medium-term political outlook for Greece and fears of fresh contagion to Spain and Italy drove the market pessimism, with bond yields in Spain hitting a new euro-era high.

Earlier, in late morning trade, London’s FTSE 100 index fell 0.07 percent to 5,472.27 points, Frankfurt’s DAX 30 gained 0.72 percent to 6,274.01 points and in Paris the CAC 40 climbed 0.20 percent to 3,094.47.

AMERICA: US indexes opened lower, then drifted between modest gains and losses. Homebuilders rallied after a measure of confidence rose to a five-year high. The Dow Jones industrial average closed down 25 points, to 12,741.

Crisis-weary investors scoffed Monday at what had appeared to be a hopeful turn in the European debt crisis: a victory for pro-Europe parties in a Greek election. U.S. stocks were little changed, and borrowing costs for Spain surged to alarming levels.

Investors appeared fed up with policy makers’ inability to resolve a crisis that has bedeviled markets for more than three years. Leaders of the most developed countries are meeting in Mexico to discuss the crisis and the slowing global economy.

“Even though we avoided the worst-case scenario in Greece, the crisis has entered a new and dangerous phase, and it doesn’t end with Greece,” said Michelle Gibley, director of international research at the Schwab Center for Financial Research, a division of the Charles Schwab brokerage.

U.S. indexes opened lower then drifted between modest gains and losses. Homebuilders rallied after a measure of confidence among U.S. builders rose to a five-year high.

Spanish borrowing rates spiked Monday above levels that forced other countries to take bailouts, a sign that bond investors fear Spain will default on its debts.

The Dow Jones industrial average closed down 25.35 points, or 0.2 percent, to 12,741.82. The Nasdaq composite index rose 22.53 points, or 0.8 percent, to 2,895.33. It was lifted by Apple, its biggest component, which rose $11.65, or 2 percent, to $585.78.

Rival tech titan Microsoft will make a “major” announcement after the market closes. Many expect it to introduce a tablet computer that would compete with Apple’s market-dominating iPad.

The Standard & Poor’s 500 index rose 1.94 points, or 0.1 percent, to 1,344.78. Of its 10 major industry categories, only financials and energy stocks fell. Banks would be hit hard if the European crisis spun out of control. Energy companies followed oil prices lower.

On Sunday, Greek voters elected a party that wants to continue a program of international bailout loans that are conditioned on painful budget cuts. Traders had fretted for weeks that a radical leftist party would prevail and reject Europe’s unpopular bailout plan.

The next step, traders feared, would be Greece’s dropping the shared currency. Anxiety over a Greek exit was so pronounced that many expected bank runs on Monday if political anti-bailout parties had won the election.

Yet Greece’s situation remains precarious. The anti-bailout party got a big chunk of the vote. There’s also no guarantee that the winners will be able to form a government. Elections a month ago failed to produce a governing coalition, leading to Sunday’s do-over.

Many had expected stocks and other risky investments to rally on relief that the conservative party won. But the broader scope of Europe’s financial burdens soon overshadowed whatever breathing room the election provided.

Safe investments rose and riskier ones fell as traders continued their long vigil for a more permanent solution in Europe. Leaders there are considering a centralized system of bank regulation and deposit insurance to complement proposals of closer economic coordination.

“It doesn’t appear that any lasting solution is a possibility any time soon,” Schwab’s Gibley said. “Until we get some kind of coming together, volatility is likely to continue.”

Attention shifted Monday toward Spain and Italy, both of which will require international help if they can’t convince bond investors that their finances are sound. Benchmark stock indexes closed down 3 percent in Spain and 2.8 percent in Italy.

The yield on the 10-year Treasury note fell to 1.58 percent from 1.63 percent earlier Monday as demand increased for low-risk investments.

The yield on Spanish 10-year bonds jumped as high as 7.18 percent, the highest since Spain joined the euro. Only a week ago, Europe unveiled a massive bailout of Spain’s banks intended to reassure investors about the nation’s finances.

Greece, Ireland and Portugal needed bailouts after their borrowing costs rose above 7 percent. It looks like tiny Cyprus will need a bailout as well.

The Greek election “should be seen as a significant net positive for markets, but markets don’t always react in a rational manner,” said David Kelly, chief global strategist for JPMorgan Funds.

The ISE Homebuilders index rose 34 cents, or 3.5 percent, to $9.98. Lennar, PulteGroup, D.R. Horton, Toll Brothers and Hovnanian Enterprises all rose strongly.

Giant military contractor SAIC fell 38 cents, or 3.1 percent, to $11.86. The Defense Department said Friday that SAIC had lost its biggest contract to Lockheed Martin, a $4.6 billion deal to run the department’s global network.

Energy prices, which are sensitive to investors’ expectations of future economic growth, fell. Benchmark crude for July delivery slid 76 cents to $83.27 per barrel in electronic trading on the New York Mercantile Exchange.

Benchmark Currency Rates

	USD	EUR	JPY	GBP	CHF	CAD	AUD	HKD
USD	–	1.2601	0.0127	1.5683	1.0491	0.9782	1.0116	0.1289
EUR	0.7938	–	0.0100	1.2449	0.8326	0.7763	0.8029	0.1023
JPY	79.0100	99.5800	–	123.9240	82.8820	77.2920	79.9530	10.1850
GBP	0.6375	0.8033	0.0081	–	0.6689	0.6236	0.6451	0.0822
CHF	0.9533	1.2011	0.0121	1.4952	–	0.9324	0.9644	0.1229
CAD	1.0223	1.2880	0.0129	1.6033	1.0725	–	1.0342	0.1318
AUD	0.9884	1.2454	0.0125	1.5502	1.0370	0.9669	–	0.1274
HKD	7.7590	9.7762	0.0982	12.1686	8.1388	7.5898	7.8498	–

 

Category: FinanceAsia