Asian Stocks Extend Rally to Second Day on ECB Stimulus Optimism

  • India shares erase gains as central bank holds firm on rates
  • Japan’s Topix climbs back to January high as yen weakens

Why the ECB Faces a 'Trickier' Time in 2017

Asian stocks rose, extending a rally to a second day, as Japanese shares gained and optimism grew that the European Central Bank will continue its bond-buying program. Indian shares erased gains after policy makers unexpectedly kept interest rates unchanged.

The MSCI Asia Pacific Index climbed 0.6 percent as of 6:30 p.m. in Tokyo, after jumping the most in almost a month on Tuesday. Japan’s Topix index rebounded to the highest level since January. Investor focus this week is fixed on monetary policies around the global. Equities in India slumped as the central bank held firm on rates before a possible increase in U.S. borrowing costs. The ECB, meanwhile, is expected Thursday to extend its stimulus program beyond the current March end date. 

“This stabilization story in Europe and further stimulus from the ECB will be bullish for equities,” said James Woods, Sydney-based analyst at Rivkin Securities, a brokerage. “The minimum we’re expecting is for the ECB to announce a six-month extension.”

The MSCI Asia Pacific Index is up 3.6 percent for the year. Almost $2 trillion has been added to the value of global equities in the past month amid speculation U.S. President-elect Donald Trump will stoke inflation. Stocks have rebounded over the past two days to recover in the wake of Italy’s referendum that led Italian Prime Minister Matteo Renzi to say he would resign.

Japan’s Topix index climbed 0.9 percent as the yen weakened for a third straight day. Stocks are trading at the highest level since January as calm is returning to the market. A volatility gauge for the Nikkei 225 Stock Average dropped 5.9 percent to the lowest since August 2015.

India’s S&P BSE Sensex index dropped 0.7 percent, reversing an earlier gain of 0.6 percent.
The benchmark repurchase rate will stay at a six-year low of 6.25 percent, as Governor Urjit Patel awaits clarity on the impact of the government’s surprise cash clampdown. The rates move was predicted by only eight of 44 economists in a Bloomberg survey.

Australia’s S&P/ASX 200 Index rose 0.9 percent. The statistics bureau said third-quarter gross domestic product decreased 0.5 percent from the prior quarter, the first contraction since 2011. “This will turn out to be just a blip,” Craig James, chief economist at Commonwealth Bank of Australia, told clients.

South Korea’s Kospi index advanced 0.1 percent and New Zealand’s S&P/NZX 50 Index fell 0.3 percent. Hong Kong’s Hang Seng Index climbed 0.6 percent and the Shanghai Composite Index rallied 0.7 percent from a three-week low.

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