SHANGHAI: Asian stocks rose to one-week highs, helped by solid overnight gains on Wall Street, though investors were wary of chasing prices higher until President-elect Donald Trump picks his economic team. Oil extended gains.
Crude oil climbed in Asian trading with U.S. West Texas Intermediate (WTI) up 1 percent as the dollar pulled back and expectations of production cuts grew.
Prices surged 4 percent to a three-week high on Monday, after comments from Russian President Vladimir Putin raised hopes that producer countries will reach a deal at a meeting next week to limit output.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1.3 percent, pulled up by a 1.3 percent rally in Australian shares. Korean shares and Hong Kong stocks rose 0.9 and 1.3 percent each. European stocks were also expected to open higher with gains seen around 0.5 percent for key markets.
“Most of the flow into stocks seems to be retail-oriented with institutional investors preferring to sit out the rally unless they get a clearer picture on Trump’s economic team,” said Andrew Sullivan, managing director, sales trading at Haitong International Securities Group in Hong Kong. Trump met some officials and outlined plans for his first day in office on Monday, including withdrawing from the TPP Asia-Pacific free trade accord and investigating abuses of work visa programs.
Such actions may lead to retaliation by trade partners such as China and could potentially derail markets, noted Libby Cantrill, head of public policy at bond giant PIMCO.
But for now, expectations that Trump’s administration will adopt expansionary fiscal policies have sent U.S. stocks to a record high, while a belief that such policies would fuel inflation and lead to higher interest rates pushed up bond yields and strengthened the dollar.
On Monday, U.S. stocks closed at a record high and European markets moved higher. Investors in Japanese stocks appeared unfazed by Tuesday’s e earthquake in northern Japan.
“Investors will react if more manufacturers halt operations in their factories in the region, but right now the impact from the earthquake is limited,” said Hiroaki Mino, director of the investment information department at Mizuho Securities.
The benchmark Nikkei average was broadly steady and the yen ticked up a shade against the U.S. dollar, although still near the five-month low hit earlier in the session.
Trading volume was generally low ahead of the U.S. Thanksgiving holiday, with expectations of a U.S rate increase next month already priced in by markets.
