Asian markets extend rally on central bank hopes

Stocks Photograph:( Getty )

AFP Hong Kong Jul 04, 2016, 03.45 AM (IST)
Asian stocks pushed higher again on Monday, building on last week's rally as central banks around the world promised support to financial markets after Britain's vote to leave the European Union (EU) fuelled fears of another rout.

The optimism that characterised last week continued as investors tracked another surge in New York and Europe, helped by upbeat US and Eurozone data.

However, analysts warned there was still a plenty of headwinds as Britain and EU leaders must agree a breakaway deal, while the global economy remained fragile.

Tokyo rose 0.4 per cent by the break, Hong Kong climbed 1.3 per cent, Shanghai added 0.8 per cent and Seoul 0.3 per cent.

South Korea's promise of $17 billion in stimulus last week came as dealers speculate that Japan will bolster its own multi-billion-dollar programme, while the chances of the US raising interest rates this year have all but evaporated.

On Thursday, Bank of England boss Mark Carney became the latest to provide assurances, indicating policymakers could embark on fresh monetary easing -- raising the possibility of a cut in rates.

Richard Jerram, chief economist at Bank of Singapore, said, "Overall the impact of Brexit on the global economy seems likely to be limited, with the pain concentrated on the UK and, to a lesser extent, the rest of the EU."

But Nicholas Teo, a trading strategist at KGI Fraser Securities in Singapore, told Bloomberg News, "While the potential for increased liquidity from central banks has helped calm stock markets, there’s still a lot of uncertainty out there.

"The strengthening US dollar isn’t good for emerging markets. With China still on a slowdown, US recovery tentative and the messy UK-EU divorce, volatility will remain heightened," he added. 

The Pound edged up against the dollar after taking a hammering from the referendum outcome. In early trade it bought $1.3307 against $1.3267 Friday in New York and is well up from the 31-year low $1.3121 touched at the start of last week.

(AFP)
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