Asian shares near decade high on global momentum

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By 2017-10-13

Reuters: Asian stocks were near a decade high on Thursday, riding the bull run in global equity markets, while the dollar sagged after the Federal Reserve showed a guarded view towards inflation.

MSCI's broadest index of Asia-Pacific shares outside Japan rose to its highest since December 2007 and was last up 0.2%.
Japan's Nikkei was up 0.5% after brushing 20,980.92, its highest since December 1996. South Korea's Kospi added 0.2% to mark a fresh record peak and Hong Kong's Hang Seng scaled a decade high before dipping 0.05%.

Asia took cues from Wall Street, where major indices rose to yet another set of record closes overnight following a report that a market-friendly candidate was being pushed as successor to Janet Yellen at the helm of the Fed.

Broader investor risk sentiment has improved this week after Catalonia dialled back plans to break away from Spain, with MSCI's 47-country world stocks index reaching a record high. Global equities now appear to be taking geopolitical developments such as the secessionist push in Spain and tensions on the Korean Peninsula in their stride, to reach those record tops.

"Fundamentally, the global economy is in decent shape. Corporate sentiment is also sound as evidenced by strong data like the Chinese PMI, US ISM and Japanese tankan. All these factors are leading to the rise in global stocks," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

"Financial markets will remain wary of geopolitical headlines. But barring actual military conflicts, negative responses by equities are expected to be short-lived."

The dollar index against a basket of six major currencies slipped to a two-week low of 92.839 following the release of the minutes from the Fed's last policy meeting on 19-20 September.
Fed policy makers had a prolonged debate about the prospects of a pickup in inflation and the path of future interest rate rises if it did not, the minutes showed.

While this did little to cool expectations for the Fed to raise interest rates in December, it did make the central bank appear slightly less hawkish than it appeared right after the September policy meeting when it signalled the year-end monetary tightening.
The dollar was particularly weak against the euro as relief over Catalonia stopping short of a formal declaration of independence supported the common currency.

The euro was 0.1% higher at $1.1869, its highest since 25 September and on track for a fifth straight day of gains.
The dollar was little changed at ¥112.410, having bounced back from a two-week trough below ¥112 plumbed earlier this week.
The US currency was seen to have found support after a media survey showed that Japanese Prime Minister Shinzo Abe's ruling party could come close to keeping its two-thirds 'super' majority in an October 22 lower house election.
Such an electoral outcome would suggest a continuation of Abe's reflationary economic policies, said Heng Koon How, head of markets strategy for United Overseas Bank in Singapore.

"It means that the Bank of Japan's quantitative easing will continue, that will keep the yen on balance weak and so it supports dollar/yen," Heng said.

The Mexican peso stood firm at 18.686 pesos to the dollar. It had gained 0.7% overnight to pull away from a five-month low of 18.852, although the currency was seen coming under renewed pressure if the ongoing North American Free Trade Agreement (Nafta) talks run aground.

The US, Mexico and Canada have negotiated this week to reform Nafta. There is concern that US President Donald Trump could opt to withdraw from the pact if his demands for more favourable treatment are not met.
The Canadian dollar gained against its broadly weaker US counterpart, extending overnight gains to reach C$1.2443 to the US dollar, its strongest in two weeks.
In commodities, oil prices eased as US fuel inventories rose despite efforts by the Opec cartel to cut production and tighten the market.

Brent crude futures were down 0.6% at $56.59 a barrel. The contracts rose for the third day on Wednesday as Opec's forecast for higher demand in 2018 and heightened tension in Kurdistan supported prices.
Spot gold was last up 0.1% at $1,292.72 an ounce, supported by a weaker dollar.

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