Asian stocks rallied, pushing the benchmark equity index to a two-week high, as the yen drove declines among regional currencies on prospects the Federal Reserve will signal the fate of U.S. monetary stimulus today. Rubber rose and Malaysia’s ringgit slid to an 11-month low.
The MSCI Asia Pacific Index of equities in the region climbed 0.8 percent by 9:51 a.m. in Tokyo, poised for the highest close since June 4. Japan’s Topix Index rose a fourth day to jump 1.9 percent. The yen lost 0.2 percent versus the dollar and sank against 12 of 16 major currencies tracked by Bloomberg. Australia’s dollar also weakened. Standard & Poor’s 500 Index (SPX)futures were little changed after the gauge climbed 0.8 percent in New York. Natural gas futures rose a third day, while crude oil held near a nine-month high.
Fed Chairman Ben S. Bernanke will speak to reporters at the end of the Fed’s two-day meeting today. More than $2 trillion has been shaved from global markets since May 22, after Bernanke signaled that the asset buying program aimed at bolstering the U.S. economy could be scaled back. Data in the U.S. yesterday showed housing starts rose and the cost of living increased less than forecast in May. Oil rallied as the conflict in Syria boosted concern Middle Eastern supplies will be disrupted.
“The Fed meeting has certainly been one of the key focus points for investors globally over the past couple of weeks,” James Lindsay, an Auckland-based fund manager at Tyndall Investment Management Ltd., which oversees about $23 billion, said by phone. “I don’t think the Fed wanted as much of a reaction as they received. What was meant to be very mild comments led to huge changed in bonds, currencies and equity markets. It may not have been the Fed’s intention for those comments to have big ramifications.”
The yen slipped to 95.46 per dollar and lost 0.2 percent to 127.88 per euro. It fell against all 16 major currencies except for the Singapore and Canadian dollars, Mexic’s peso and the South Korean won. The so-called Aussie weakened for a fourth day, losing 0.4 percent to 94.52 U.S. cents. The won dropped 0.3 percent versus the dollar to the weakest level since April 10.
The ringgit posted the second-biggest decline among 11 Asian currencies tracked by Bloomberg, losing 0.4 percent to 3.1661 per dollar, the weakest level since July 26 last year. The Thai baht retreated 0.5 percent, sliding for a third day.
The Fed’s easing program has contributed to a 16 percent advance in the S&P 500 this year, and the gauge has risen 144 percent from its bear-market low reached in 2009 amid four straight years of earnings growth.
The Topix has risen 29 percent in 2013 while the MSCI Asia Pacific is up 2.6 percent. The gauge of regional equities slid to 11.9 times estimated earnings June 13, the cheapest level since November, after the Bank of Japan left its lending program unchanged, adding to concern that stimulus that has supported markets and developed economies since the global financial crisis will be reduced.
U.S. Commerce Department data yesterday showed builders broke ground on 914,000 homes at an annualized rate, up 6.8 percent while below the the median estimate of 950,000 from 82 economists surveyed by Bloomberg. Another report showed the consumer price indexincreased 0.1 percent in May, half the median projection, after falling 0.4 percent in April.
Bernanke said last month that sustainable improvement in U.S. labor markets could allow for a reduction in quantitative easing.
‘Waiting to Hear’
“Everybody’s just waiting to hear what the Fed has to say,” Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co. in Elmira, New York, said by phone yesterday. “If they say they’ll taper sooner rather than later, there’ll be fear in the market and we’ll see a decline for some time in stocks. We’ll need to see the results of tapering. If the economy continues to roll along and grow without as much Fed buying, that will spur us to the next leg up in the bull market.”
Japan’s Nikkei 225 Stock Average Volatility Index rose for the first time in four days, gaining 0.8 percent.
The Dollar Index fell 0.1 percent. Yields on 10-year Treasury notes were little changed at 2.18 percent in New York after climbing five basis points the previous day.
U.S. President Barack Obama said that Fed Chairman Bernanke has stayed in his post “longer than he wanted,” one of the clearest signals the central bank chief will leave when his current term expires next year.
“Ben Bernanke’s done an outstanding job,” Obama said in an interview with Charlie Rose, when asked about nominating him for another term subject to Senate approval. “He’s already stayed a lot longer than he wanted or he was supposed to.”
Investors cut bond holdings to a near two-year low this month and bought stocks as expectations the Fed may remove monetary stimulus bolstered growth forecasts, a Bank of America Corp. survey showed.
A net 50 percent of 190 global fund managers, who together oversee about $572 billion, said they now hold fewer bonds than are represented in asset-allocation benchmarks, while the proportion who are overweight on stocks rose to 48 percent from 41 percent as they bought U.S. and European shares. Emerging-market equity holdings slumped to the lowest level since December 2008.
“Investors’ sentiment has been surprisingly resilient in recent weeks despite the jump in volatility in financial markets,” Michael Hartnett, New York-based chief investment strategist at Bank of America’s Merrill Lynch unit, wrote in a note to investors yesterday. “While our fund-flows data shows bond capitulation, the survey shows that there has been no capitulation in equities in the U.S. and Europe.”
Crude rose 0.1 percent to $98.51 a barrel, set for the highest settlement price since Sept. 14 after gaining 0.7 percent yesterday. Gas futures gained 0.4 percent, rising for a third day, on prospects hotter weather later this month may spur demand from power plants.
Palladium retreated a fifth day, losing 0.4 percent to $706.60 an ounce, the lowest level since May 8 based on closing prices. Rubber futures due in November surged 1.7 percent.
The 12 percent slide in Philippine equities from a May 15 record is luring BDO Unibank Inc. (BDO) and Metropolitan Bank & Trust (MBT) Co., two of the nation’s biggest money managers, after the market was among the hardest hit in Asia after Bernanke’s comments on prospects for paring stimulus. The Philippine Stock Exchange Index (PCOMP) traded at 17.03 times estimated earnings June 13, the lowest level since January.
South Korea’s Kospi Index (KOSPI) fell 0.6 percent. Australia’s S&P/ASX 200 Index gained 0.4 percent, after declining 0.2 percent yesterday.
Futures on the Hang Seng China Enterprises Index of mainland Chinese stocks traded in Hong Kong dropped 0.3 percent. The Bloomberg China-US Equity Index of the most-traded Chinese equities in New York added 0.5 percent yesterday, rising for a second day.