Asian Stocks Strengthened as Weak Yen

Bolsters Topix
The Asian market grew firm on the back of stronger US
economic data and a rise in oil prices, while growing prospects
of a US rate hike hit gold and also boosted the dollar to a one
month highs versus the yen.
MSCI's broadest index of Asia-Pacific shares outside Japan
rose about 0.2 per cent while Japan's Nikkei gained around 0.9
per cent. On 5th September 2016, Wednesday, US S&P 500
Index moved up by 0.43 per cent, led by banks and energy
companies. US services sector activity recovered sharply in the month of September from
six-year low hit in August, following similarly upbeat news from US factories on Monday.
Chotaro Morita the chief bond strategist at SMBC Nikko Securities said that both
manufacturing as well as service indexes recovered from big falls in August. So far it is
not quite clear what the underlying US economic trend is, provided the recovery in
Japanese as well as Chinese surveys the global economic cycle appears to be rebounding
for now. However, one can clearly see the Rising optimism on the US economy which is
boosted by the bets that the US Federal Reserve can go for a raise in the interest rates in
December.
The policy-sensitive 2 year US note yield jumped to a four month high of 0.857 per cent
with the interest rate futures pricing in more than a 60 per cent chance the Fed will
increase by its December meeting after the Presidential election. The 10 year US
Treasuries yield also rose to 1.706 per cent, against the 1.60 per cent at the start of week.
The rise in bond yields partly stemmed as a result of speculation that the European Central
Bank may eventually taper its bond buying after Bloomberg reported on Tuesday, 4th
September 2016, the bank would probably wind down the monthly 80 billion euro (USD
90 billion) scheme. Euro zone bond yields have picked up since then, with Germany's 10

year Bund yield growing back to near zero per cent from 2 1/2-month low of minus 0.16
per cent hit of the last week.
The spectre of tighter monetary policy in the U.S. as well as Europe hit precious metals
hard. Gold was seen to extend losses after witnessing a sharp fall on Tuesday, hitting a 3
1/2-month low of US$ 1,262.2 per ounce. Other precious metal silver also fell to US$
17.565 per ounce, its lowest since late June. In the currency market, the dollar climbed to a
one-month high of 103.67 yen and last stood at 103.52 yen. The British pound also showed
some signs of recovery slightly after hitting a low of almost three-decades of US$ 1.2686
on Wednesday on worries about Britain's exit of EU. It last traded at US$ 1.2747.
The euro changed very little at US$ 1.1209, with pressure from concerns about the health
of Deutsche Bank offset by speculation about the European Central Bank's tapering.
However, oil prices rose to their highest since June after the fifth unexpected weekly
drawdown in US crude inventories added to support on hopes that major producers will
agree to cut output next month.
US Energy Information Administration said crude stockpiles fell 3 million barrels last
week, quite below the build of 2.6 million barrels forecast by the analysts in a Reuters poll.
International benchmark Brent futures rose to as high as US$ 52.09 every barrel on
Wednesday, the highest since early June and up almost 6 per cent so far this week.
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Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022
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Article Written by
Nabarupa Kanjilal