Asia stocks, pound savour the relief of UK U-turn
Reuters · 14 Nov 2022 317 Views
A man walks past in front of an electric monitor displaying the Japanese Nikkei share average in Tokyo

SINGAPORE, Oct 18 (Reuters) - Asia stocks rose on Tuesday as the dramatic U-turn in British fiscal policy brightened investor sentiment, while sterling flirted with two-weeks high on hopes the Bank of England may further delay plans for quantitative tightening.

The British central bank, which had already delayed the start of a scheme to sell down 838 billion pounds ($954.90 billion) of government bond holdings, is likely to push the sale of the bonds, the Financial Times reported on Tuesday.

The FT report comes a day after Britain's new finance minister Jeremy Hunt abandoned most of Prime Minister Liz Truss' economic plan that had led to a political maelstrom fuelled by market turmoil, resulting in the Bank of England being forced to intervene to calm the bond market.

Sterling was last trading at $1.1382, up 0.26% on the day, adding to its gains of 1.6% in the previous session. The pound had jumped 0.36% to $1.1398, near Monday's high of $1.144, the strongest since Oct. 5.

Morgan Stanley analysts said the fiscal U-turn was likely to have significant implications for the BoE as its economists now revise their call for the November meeting to a 75-basis-point rate hike, from 100 basis points.

"Given such a wholesale scrapping of Truss' Tory leadership promises, it remains an open question how long Truss will remain in power," said Tapas Strickland, head of market economics at National Australia Bank.

China's stock market (.SSEC) nudged higher, up 0.2% as the Chinese ruling Communist Party's twice-a-decade congress remains in session this week.

Chinese state banks are stepping up intervention to defend the weakening yuan, banking sources told Reuters on Monday, while many companies have announced share buyback programmes.

The dollar index fell 0.178%, touching its lowest levels since Oct. 6, while the euro was up 0.21% to $0.9859.

The Australian dollar rose on Tuesday after the Reserve Bank of Australia said it expects to raise interest rates further over the coming months.

The yen touched a fresh 32-year low of 149.10 per dollar on Monday, not far off the psychological metric of 150. /FRX

Investors have been watching out for any signs of further intervention by the Bank of Japan, with authorities repeatedly warning of a firm response to overly rapid yen declines.

Intervention is more about speed of moves than it is levels, said Ray Attrill, head of foreign-exchange strategy at National Australia Bank.

"I don't think the Japanese authorities are particularly keen to see dollar yen at 150 in the immediate term and that's why markets are being a bit guarded."

Meanwhile, China has delayed the release of economic indicators, including the country's third-quarter gross domestic product due on Tuesday and trade data that had been scheduled last Friday. read more

The drop in the dollar helped prop up gold as well as oil prices.

Brent crude futures rose 74 cents, or 0.8%, to $92.36 per barrel by 0505 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 78 cents, or 0.9%, to $86.24 per barrel.

Spot gold was up 0.2% at $1,651.75 per ounce.

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was up 1.55%, while Japan's Nikkei .N225 rose 1.59%.

European stock futures indicated stocks were set to continue their ascent, with the Eurostoxx 50 futures up 1.25%, German DAX futures up 1.22% and FTSE futures up 0.87%. U.S. futures also pointed to a higher opening with S&P 500 futures up 1.6% and Nasdaq futures up 1.8%.

(Source : Reuters) , all rights reserved by original source.