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Global Markets Overlook

Asia shares hit 2016 highs as US dollar weakens

  • European shares inch lower led by banks

Mario Draghi, the head of the European Central Bank, has given world leaders a clear message — don’t rely on us for everything.

Speaking to reporters in Brussels last night during an EU summit on the refugee crisis, Draghi revealed he had told politician to do their bit and reform their economies.

The ECB chief said:

“I made clear that even though monetary policy has been really the only policy driving the recovery in the last few years, it cannot address some basic structural weaknesses of the eurozone economy.

“For that you need structural reforms, mostly driven to raise the level of demand, public investments and lower taxes. Even more importantly, one needs clarity on the future of our … monetary union.”

Last night, the Dow Jones industrial average turned positive for the year, putting the turmoil of January and February behind it.

And that has fed through to Asia, where most markets have posted gains.

 Asia’s major stock markets are higher after oil prices rose above $40 per barrel overnight.

Japan’s Nikkei is missing out on the rally, though. Shares are being dragged down because the yen has risen against the US dollar, hurting Japanese exporters and hurting hopes of higher inflation.the Nikkei .N225 closing down 1.3 percent for a weekly decline also of 1.3 percent.

Both Australia’s S&P/ASX 200 rose 0.3% to 5,183.10 and Korea’s Kospi Index gained 0.2% to 1,992.12.

Hong Kong’s Hang Seng closed 0.8% higher, while the Shanghai Composite added 1.7%.

Chinese shares were lifted by data showing the mainland property market recovery is gaining steam.

New home prices across 47 major Chinese cities saw the biggest gain since 2014 in February, compared with 38 a month earlier.

European shares opened slightly lower on Friday with banking stocks leading the decline and Italian insurer Generali down after net profit fell short of expectations.

Banking stocks were the top sectoral fallers with a drop of 1 percent. Banco Popolare and Banca Popolare di Milano were both down more than 4 percent after the ECB set conditions to approve their planned merger and asked for a multi-year industrial plan within a month.

Commodities

Gold decreased 4.27 USD/t oz. or 0.34% to 1255.09 on Friday March 18 from 1259.36 in the previous trading session.

The broader gains echoed a recovery on Wall Street, where the S&P 500 Index .SPXgained 0.66 percent overnight to close at its highest since Dec. 31, led by the materials and energy sectors.

The rallies in commodities and equities were spurred by Wednesday’s Fed review when policymakers took a more cautious stance on future U.S. interest rate increases.

The benign rate environment, as well as optimism major producers would reach a deal to freeze output, proved a boon for oil.

OPEC kingpin Saudi Arabia and non-OPEC producers led by Russia will meet on April 17 in the Qatar capital Doha, aiming for the first global supply deal in 15 years.

After surging more than 10 percent over the prior two sessions, U.S. oil futures advanced to $40.55, the highest level since Dec. 4. They were last trading at $40.25, on track for a 4.6-percent increase for the week, their fifth straight week of gains and longest winning streak in about a year.

Brent crude  held close to its three-month high of $41.60 reached in the previous session and again on Friday. It’s headed for a 3-percent gain for the week.

Oil’s rally has also been aided by a weakening dollar, triggered by the Fed’s cautious approach to raising rates.

Currencies:

he dollar’s index against a basket of six major currencies .DXY =USD on Friday touched a five-month low of 94.578, before edging up to 94.825.

The euro retreated slightly from the five-week high of $1.1342 it hit on Thursday, last fetching $1.1310.

The yen  was trading at 111.48, after climbing to 110.67 to the dollar on Thursday, the highest since October 2014.

The Chinese yuan firmed sharply against the dollar to reach a 2016 high, after the People’s Bank of China set the midpoint rate at 6.4628 per dollar prior to market open, compared with the previous fix of 6.4961, the biggest daily rise since November.

The spot market  opened at 6.4615 and hit an intraday high of 6.4559, its firmest since late December, before easing to 6.4669, still stronger than the previous close of 6.4755.

Even the British pound which has been dogged by worries about “Brexit” from the European Union, retreated only 0.2 percent to $1.4468 from Thursday’s one-month high of $1.4504.

The Australian dollar shot up to $0.7681, its highest since July, helped by a recovery in commodity prices. It was last trading at $0.7654.

Copper CMCU3 advanced to a 4-1/2-month high of $5,126 a tonne, and was last trading up 1 percent at $5,118. Silver XAG= too jumped to a 4-1/2-month high of $16.111 per ounce, before falling back slightly to $16.08.

 

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