January 11, 2019: The upbeat tone that has characterized this week helped Asian markets to fresh gains on Friday, with Hong Kong on course for a sixth straight day of rises.
Investors globally have been riding a wave of optimism since last week when the head of the Federal Reserve indicated it will likely slow its pace of interest rate hikes, while there were also signs that China and the US could eventually reach a trade deal.
And the gains were not limited to equities, with oil rising about 20 percent from 17-month lows at the end of December, while high-yielding currencies were being supported by a new-found demand for riskier assets.
Friday's rally followed another positive lead from Wall Street, where dealers brushed off disappointing retail figures as they focused on the prospect that borrowing costs will not rise as much as previously feared.
Fed minutes Wednesday showed policymakers are happy to hold off any more rate hikes as they assess the state of the economy, backing up dovish comments last week by its head Jerome Powell.
There was a slight wobble in New York after Powell on Thursday suggested the bank's securities holdings should be “substantially smaller” — a sell-off by the Fed of such assets would lift interest rates.
But the general mood remained upbeat as a number of other top Fed officials indicated they were happy to see a break in hikes.
“Markets are ultimately waiting to see if the Fed's new rhetoric related to stepping back, does it translate to action, and does the Fed actually pause at some point,” Morgan Stanley economist Dan Skelly told Bloomberg TV in New York.
“That's really what we are waiting for to see a sustained move higher” in stocks, he said.
Yuan holds gains –
In Asia, Hong Kong rose 0.3 percent in the morning, having risen more than five percent since last Thursday's close, while Shanghai was also up 0.3 percent and Tokyo added 0.7 percent by the break.
Singapore rose 0.6 percent, Seoul added 0.4 percent and Taipei jumped 0.6 percent while there were also gains in Wellington and Jakarta, though Sydney was slightly lower.
Markets are now awaiting the next development in the China-US trade spat after three days of talks this week that both sides indicated had been productive.
The Chinese Yuan is one of the main beneficiaries of the progress in trade talks and softer Fed outlook, with the unit sitting at a more than five-month high against the dollar, despite a string of weak data pointing to a growth slowdown in the world's number-two economy.
However, observers were skeptical about how long it will maintain its strength.
“The Yuan can hold up fine” until the Fed hikes rates again, trade tensions resume and Beijing ramps up its stimulus measures, Michael Every, head of Asia financial markets research at Rabobank in Hong Kong, said.
“It's a 'when' and not an 'if' for when it reverses direction again and we test new lows”.
Other regional units were mixed Friday but were mostly holding up after a week of gains.
However, Mizuho Securities warned in a client note about the possible impact from the ongoing US government shutdown, which shows no signs of ending, and the Brexit vote next week that the government is likely to lose.
On oil markets both main contracts were slightly lower but were heading in the right direction after plunging more 40 percent from four-year between October and the end of December.
“Positive vibes on US-China trade talks, a relief rally in global equities, optimism in OPEC-led cuts and falling US rig count have raised oil prices significantly in the new year,” said Phillip Futures commodities analyst Benjamin Lu.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 0.7 percent at 20,306.16 (break)
Hong Kong – Hang Seng: UP 0.3 percent at 26,594.51
Shanghai – Composite: UP 0.3 percent at 2,542.39
Dollar/yen: DOWN at 108.35 yen from 108.49 at 2200 GMT
Euro/dollar: UP at $1.1513 from $1.1502
Pound/dollar: UP at $1.2754 from $1.2746
Oil – West Texas Intermediate: DOWN 41 cents at $52.18 per barrel
Oil – Brent Crude: DOWN 60 cents at $61.08 per barrel
New York – Dow: UP 0.5 percent at 24,001.92 (close)
London – FTSE 100: UP 0.5 percent at 6,942.87 (close)