Asia markets build on gains as dealers look past North Korea, Irma
Tokyo led gains across Asian markets on Tuesday (Sep 12), tracking a record on Wall Street as the North Korea crisis eased and dealers breathed a sigh of relief that Hurricane Irma caused less damage to Florida than feared.
The UN Security Council voted unanimously Monday to step up sanctions against North Korea, having won the crucial support of Russia and China, while the US held out hope for a peaceful resolution to the crisis.
The move provided a much-needed boost after Pyongyang's Sep 3 nuclear test hammered markets last week and sent investors fleeing for the safe havens of gold and the yen.
Despite widespread speculation, the North did not mark its foundation day Saturday with another missile launch. This helped lift all three main New York indexes more than one percent Monday, with the S&P 500 at a new record.
"What road seems to be travelled now is one of negotiation rather than provocation. There has been a reversal of the tactics over the last week and I think that's what the markets are seeing," Jefferies chief global strategist Sean Darby told Bloomberg Television.
Most of Asia followed New York's example, with a sharply weaker yen a plus for Japan's exporters. The dollar was at ¥109.56 compared with the 10-month lows around ¥107.30 yen last week.
The Nikkei ended up 1.2 per cent - a one month high - while Shanghai added 0.1 per cent and Sydney gained 0.6 per cent. Seoul ticked up 0.3 per cent while Taipei and Singapore were also higher. Manila was closed owing to flooding from a major storm.
Hong Kong added 0.1 per cent following strong gains over the previous two sessions.
In early European trade London rose 0.1 per cent, Paris put on 0.3 per cent and Frankfurt gained 0.5 per cent.
EURO RALLY FADES
Analysts said that while Irma was still deadly, the fact that it struck the west coast of Florida instead of cutting through the spine of the state meant billions of dollars less damage.
That provided extra support to the dollar, which also made some inroads against the euro as speculation swirled that some members of the European Central Bank favour a slow wind-down of its stimulus programme.
The single currency was back below US$1.20, having broken the marker last week for the first time since the start of January 2015.
China's yuan retreated for the first time in two weeks after the central bank relaxed capital controls put in place earlier this year to prevent a flight of cash from the country. The currency was at 6.5277 to the dollar, against 6.4436 late last week.
That compares with levels close to 7.000 at the start of the year and indicates authorities may be looking to stop it appreciating too much too quickly.
Eyes will now turn to the release of US inflation figures later in the week, which could provide some clues as to the Federal Reserve's plans for raising interest rates again this year. A weak run of data in recent months has led dealers to lower their expectations for any more tightening.
Greg McKenna, chief market strategist at AxiTrader, said there were hopes on trading floors that President Donald Trump's decision to work with Democrats to lift the debt ceiling this month could provide hope for his economic agenda.
"The new paradigm in Washington which might be emerging between President Trump and the Democrats might have rekindled hopes that the Trump agenda for the economy isn't dead," he added.
- Key figures around 0820 GMT -
Tokyo - Nikkei 225: UP 1.2 per cent at 19,776.62 (close)
Hong Kong - Hang Seng: UP 0.1 per cent at 27,972.24 (close)
Shanghai - Composite: UP 0.1 per cent at 3,379.49 (close)
London - FTSE 100: UP 0.1 per cent at 7,419.50
Euro/dollar: DOWN at US$1.1970 from US$1.2000 at 2050 GMT
Dollar/yen: UP at ¥109.56 from ¥109.47
Pound/dollar: UP at US$1.3187 from US$1.3168
Oil - West Texas Intermediate: DOWN three cents at US$48.04 per barrel
Oil - Brent North Sea: DOWN six cents at US$53.78 per barrel
New York - DOW: UP 1.2 per cent at 22,057.37 (close)