TOKYO: Financial markets continued to recover from the panic-selling triggered by last week’s U.K. vote to leave the European Union, with Asian stocks rallying and South Korea’s won strengthening.
The MSCI Asia Pacific Index rose for the third day this week, building on the steepest two-day gain in global equities since August. Sterling fluctuated after EU leaders said they wanted Britain’s withdrawal from the bloc to be orderly. The won and Malaysia’s ringgit both climbed for a third day and were the best performers among 31 major currencies. Crude oil fell for the first time in three days, after touching $50 a barrel on Wednesday as data showed a drop in U.S. stockpiles. Gold also retreated as demand for haven assets moderated.
Central bank efforts to contain the fallout from the Brexit decision have enjoyed some success, with global equities having recouped over the last two days more than half of the almost $4 trillion of market value wiped out over Friday and Monday. The U.K.’s FTSE 100 Index has recovered all of its losses since the vote, as has a Bloomberg gauge of global commodities.
“The initial shock over the U.K. voting out of the EU is easing across the world,” said Mitsushige Akino, a Tokyo-based executive officer at Ichiyoshi Asset Management Co. “We’ve survived the event-related risk, and investors are beginning to see that the impact on the actual economy is limited. There’s hope for policy measures globally, not just in Japan, so that’s supporting markets.”
Federal Reserve Bank of St. Louis President James Bullard is due to speak Thursday in London and may shed light on the U.S. interest-rate outlook after futures indicated the next increase is unlikely to come before 2018, having at the start of this month priced in a 53 percent chance of a move by July. Taiwan’s central bank is forecast to cut its benchmark rate at a monetary policy review, while Mexico’s is seen raising borrowing costs, Bloomberg surveys show. Economic data scheduled for release include euro-area inflation, German unemployment and U.S. weekly jobless claims.
The MSCI Asia Pacific Index climbed 1 percent as of 11:54 a.m. Tokyo time, rising to within 1 percent of where it closed on July 23, the day of the U.K.’s referendum. The measure plunged 3.7 percent on July 24 as the vote’s outcome was announced.
Benchmark stock indexes advanced across the region, with gauges in Australia, Hong Kong and Singapore all rallying more than 1 percent.
Futures on the S&P 500 were little changed following a 1.7 percent surge in the index on Wednesday. Contracts on the U.K.’s FTSE 100 Index added 0.2 percent.
The pound weakened 0.2 percent to $1.3404, after rebounding 1.5 percent over the last two days. The currency is on track for a 6.6 percent loss this quarter, its worst performance since 2008.
The MSCI Emerging Markets Currency Index gained for a third day, rising to within 0.3 percent of its pre-Brexit close. The won strengthened 0.6 percent versus the dollar as data showed factory output increased in May by more than economists expected. The ringgit advanced 0.4 percent as this week’s pickup in crude prices brightened prospects for Malaysia, Asia’s only net oil exporter.
“I’m looking at the rebound in risk and the firming in oil prices and those factors are very supportive,” said Stephen Innes, a senior trader at Oanda Asia Pacific Pte Ltd. in Singapore. “The global central bankers are in the background and the markets realize that the central bankers are going to stand in front of any capitulation.”
Both the Bank of England and the European Central Bank stressed the availability of liquidity within hours of the referendum’s results. The Swiss National Bank intervened in the foreign-exchange market to contain volatility following the vote, while Bank of Japan Chief Haruhiko Kuroda said Wednesday that more funds can be injected into the market should they be needed.
The yen, which soared beyond 100 per dollar as the Brexit referendum results landed on June 24, was little changed Thursday at 102.83. It’s jumped more than 9 percent this quarter, set for its biggest gain since 2008.
