Asian equities push higher on easing global concerns

Friday, February 13, 2015

Asian equity indices extended gains overnight as renewed optimism in European and US markets spilled over to the Asian session. Steady progress regarding the situation in Ukraine and ongoing talks between creditor nations and Greece has eased some of the market tensions that dominated trading activity at the start of the week. Almost all major benchmark stock indices across the region posted solid gains throughout the session, however, Japanese equities faced renewed pressure with the Nikkei 225 and TOPIX both unable to push into positive territory as a stronger yen capped any potential gains. The yen rallied 1.12% against the dollar yesterday, at one stage trading below the 50 day MA towards 118.51 as investors speculated that the central bank may avoid increasing stimulus at their forthcoming meeting next week. The currency has experienced further strength during overnight trading, testing levels back towards 118.50 early on before settling around 118.90 ahead of the European trading session. A growing number of market participants are increasingly expecting Bank of Japan governor, Haruhiko Kuroda to hold off from further easing which has up until recently kept considerable pressure on the yen, supporting equity indices higher. Any further easing could see the yen retrace levels back towards the seven year high of 121.85 against the dollar, seen last December.

The German economy grew faster than expected during the last quarter of 2014 as preliminary Q4 GDP data released earlier this morning saw the eurozone's largest economy grow by 0.7% q/q. Market participants polled by Bloomberg had expected a 0.3% q/q growth rate after previous GDP data failed to excite investors, with Q3 GDP growth coming in at 0.1% q/q. While the data offers some insight into the gradually improving outlook, the single currency bloc is still suffering from deflationary pressures and rising unemployment and with the ECB embarking on a significant QE programme investors would do well to remind themselves of the underlying fragility of the European economy. France’s Q4 GDP reading was in line with expectations of 0.1% q/q, a marked deterioration from the previous quarter’s reading of 0.3% q/q further highlighting the tenuous economic situation in Europe. 

Markets breathed a sigh of relief as steady progress regarding Greece’s bailout was being made with both Germany and Greece continuing to work on a deal to help the indebted nation. Germany has maintained a publicly hard-line stance on any renegotiated terms for the bailout package but recent developments indicate that Germany would be more open to allow some flexibility on the existing conditions. With Angela Merkel stating yesterday that Germany was ready for some compromise but followed up by reaffirming the view that the correct procedures and rules must be followed. The euro rallied 0.5% higher yesterday on the encouraging signs as activity early this morning builds on support at yesterday’s close, pushing the currency towards 1.1440 against the dollar and with Q4 eurozone GDP and trade balance figures expected later on this morning investors will have plenty to keep themselves busy.

JPY strengthens against USD on BoJ speculation

JPY Curncy Japanese Yen Spot 2015 02 13 07 22 57

EUR lifts after signs of progress regarding Greek bailout

EUR Curncy Euro Spot Daily 13 2015 02 13 07 55 39

German Q4 GDP surprises on the upside

GRGDPPGQ Index Germany GDP Chai 2015 02 13 08 02 23

Events for today

0700

DE

Q4

GDP

0930

UK

Dec

Construction Output

1000

EZ

Dec

Trade Balance

1000

EZ

Q4

GDP

1330

US

Jan

Import Price Index

1500

US

Feb

Michigan Survey

 

 

Topics: GDP, ECB, EUR, BoJ, Yen
More from: Kash Kamal