SINGAPORE: Asian stocks advanced on Monday, taking their cue from Wall Street, while the dollar moderated but retained most gains made on stronger-than-expected July jobs growth and the promise of a US tax plan that will repatriate corporate profits. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.5 per cent. Japan’s Nikkei was up 0.6 per cent. Chinese blue chips rose 0.1 per cent, while the Shanghai Composite was flat. Hong Kong’s Hang Seng climbed 0.4 per cent. South Korea’s KOSPI was up 0.5 per cent, while Australian shares surged 1 per cent. The dollar moderated on Monday following a strong climb on Friday after data showed US nonfarm payrolls rose by 209,000 jobs last month, and June’s employment gain was revised higher. Growing signs of labour market tightness offer Federal Reserve policymakers some assurance that inflation will gradually rise to the central bank’s 2 per cent target, and likely clear the way for a plan to start shrinking its massive bond portfolio.
The dollar was also buoyed by comments from National Economic Council director Gary Cohn that the US administration is working on a tax plan that would bring corporate profits back to the United States. But the pull back in the dollar backs some views in markets that Friday’s rally may not have legs yet. The dollar index, which tracks the greenback against a basket of six global peers, inched back 0.2 per cent to 93.343. It rallied 0.76 per cent on Friday, its biggest one-day gain this year. The dollar slipped 0.2 per cent against the euro to $1.17985 per euro, after surging 0.8 per cent on Friday. The greenback rose 0.1 per cent to 110.78 yen, extending Friday’s 0.6 per cent gain. “The most logical view here is the moves on Friday were clearly just a sizeable covering of USD shorts, from what was one of the biggest net short positions held against the USD for many years,” Chris Weston, chief market strategist at IG in Melbourne, wrote in a note.
For the dollar rally to gain momentum, the market needs to change its interest rate pricing, and that hasn’t happened yet, Weston added. Markets are pricing in about an even chance of a US interest rate hike in December. Benchmark 10-year US Treasury notes inched back slightly to 2.2673 per cent. They closed at 2.269 per cent on Friday, up from Thursday’s close of 2.228 per cent. The lift in sentiment from Friday’s jobs data also supported Wall Street. The Dow closed 0.3 per cent higher, its eighth consecutive record high. The S&P and Nasdaq ended the session up 0.2 per cent. The Australian dollar strengthened 0.2 per cent to $0.7945. In commodities, oil prices edged lower but retained most of Friday’s gains, posted as the strong jobs data bolstered hopes for growing energy demand.
Officials from a joint OPEC and non-OPEC technical committee are set to meet in Abu Dhabi on Monday and Tuesday to discuss ways to boost compliance with their supply reduction agreement. US crude slipped 0.1 per cent to $49.53 a barrel on Monday, after rising 1.1 per cent on Friday. Global benchmark Brent also lost 0.1 per cent to trade at $52.37, after Friday’s 0.8 per cent gain. Gold steadied as the dollar surrendered some of its gains, but remained under pressure. The precious metal was marginally higher at $1,258.38, failing to make up most of Friday’s 0.8 per cent loss.
