Asian shares climbed to one-month highs on Wednesday, steered by a robust Wall Street on optimism over corporate earnings and prospects that the US Federal Reserve will reaffirm its willingness to wait for an extended period before raising interest rates.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.1 per cent, led by a 1.8 per cent rise in South Korean shares. Japan’s Nikkei share average also posted a sizeable 1.5 per cent increase.
European shares are expected to follow suit, with spreadbetters looking to gains of up to 0.4 per cent in Germany’s DAX and Britain’s FTSE.
US stocks rose more than 1 per cent on Tuesday, with the S&P 500 coming less than two per cent below its record peak set last month.
Quantitative easing
The Fed is widely expected to announce on Wednesday that it will end its two-year-old bond-buying stimulus, known as quantitative easing three, as the US economy continues to gather momentum.
Still Fed officials have also stressed that they are in no hurry to take policy tightening a step further by raising the interest rates from near zero levels due to subdued inflation and the poor quality of a recovery in labour markets.
“There are some views that the tapering process could be delayed to run through the rest of this year, but it is more likely that the Fed will maintain its current stance of exercising prudence in consideration of any rate hike,’’ said Lim Dong-rak, an analyst at Hanyang Securities.
US earnings data
Upbeat US earnings so far have also eased worries that corporate profits might be squeezed by sluggish global growth.
With 245 companies in the S&P 500 having reported earnings so far for the third quarter, 73.5 per cent have beat analyst expectations, according to Thomson Reuters. Over the past four quarters, 67 per cent of companies have beat estimates.
Still, Facebook Inc shocked investors after the market close on Tuesday, warning of a dramatic increase in spending in 2015 and projected a slowdown in revenue growth this quarter, falling 8.2 per cent in after hours trading.
US economic data
US economic data published on Tuesday was mixed. But a rise in consumer confidence to a seven-year high gave stock bulls enough reason to maintain their optimism on the economic recovery.
Separate data showed new orders for capital goods by US businesses fell the most in eight months in September.
Dollar vs other currencies
The data dented the US dollar against a broad range of currencies.
The euro rose to a one-week high of $1.2765 on Tuesday and last stood at $1.2738 in Asian trade. The Canadian dollar climbed to its highest level in more than two weeks against the US dollar of C$1.1165.
The dollar held firmer against the yen, however, as the Japanese currency was held back by speculation that the Bank of Japan will revise down its economic growth forecast in its economic report on Friday.
The dollar traded at 108.18 yen, not far from a two-week high of 108.36 yen hit last week. It had a muted reaction to data showing Japanese industrial output rose 2.7 per cent in September, slightly above market expectations.
Swedish crown stabilises
Meanwhile, the Swedish crown managed to stabilise after sliding to four-year lows on Tuesday, knocked by a surprisingly dovish message from Sweden’s central bank.
The Riksbank cut the interest rates more than expected to zero and said it would delay tightening policy until the middle of 2016 as it moved decisively to tackle the risk of deflation.
Overnight, one of the factors that may hold back risk sentiment is news that the US Department of Homeland Security was increasing security at government buildings in Washington and other cities because of continuing terror attack threats.