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Asia markets jump; Nikkei surges as Abe's election win spurs stimulus hopes

July 11,2016 13:08

In upper house elections on Sunday, Prime Minister Shinzo Abe's ruling coalition won in a landslide, in a development analysts said was likely to make it far easier to push through his economic agenda, dubbed Abenomics. "It is likely that a large-scale ...



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Asia markets closed higher on Monday, bolstered by election results in Japan and Australia and shrugging off concerns a strong U.S. jobs report might push the Federal Reserve closer to hiking rates.

Japan's Nikkei 225 closed up 601.84 points, or 3.98 percent, at 15,708.82, while the Topix closed up 45.91 points, or 3.79 percent, at 1,255.79. Those gains came as the yen relatively weakened against the dollar, trading at 101.88 as of 3:12 p.m., compared with the dollar earlier fetching as little as 100.42 yen.

In upper house elections on Sunday, Prime Minister Shinzo Abe's ruling coalition won in a landslide, in a development analysts said was likely to make it far easier to push through his economic agenda, dubbed Abenomics.

"It is likely that a large-scale economic stimulus program, in the magnitude of at least 10 trillion yen (2 percent of gross domestic product), will be implemented in order to restart Abenomics," Societe Generale said in a note Monday. "Some of the measures to be included in the package will be policies to reduce economic inequalities among the citizens and regions of Japan."

Australia's ASX 200 closed up 106.56 points, or 2.04 percent, at 5,337.10, boosted by a 2.47 percent gain in the financials subindex that makes up nearly half of the broader index. Major Australian banks rallied, with shares of ANZ climbing 3.46 percent. The Australian dollar traded at $0.7547 in the evening local time, coming off an earlier high of $0.7575.

On Sunday, Australia's Prime Minister Malcolm Turnbull declared his ruling coalition won the extremely close election, although the counting of votes continued more than a week after the actual vote.

"Resolution of the ambiguous federal election result over the weekend is helping the Australian dollar remain buoyant," Anthony Darvall, chief market strategist at spreadbettor easyMarkets, said in a note.

Others agreed. "With the Liberals now set to return to government, from a budgetary perspective, this will ease concerns of 'across the political floor' squabbling," Stephen Innes, senior trader at Oanda Asia Pacific, said in a note Monday.

Hong Kong's shares joined the regional rally, with the Hang Seng Index up 1.52 percent in late-afternoon trade. On the mainland, the Shanghai Composite added 7.94 points, or 0.27 percent, to 2,996.04, while the Shenzhen composite dropped 11.30 points, or 0.56 percent, to 2,000.97. In South Korea, the Kospi added 25.44 points, or 1.3 percent, to 1,988.54.

In the U.S. on Friday, the nonfarm payrolls report showed that the U.S. created 287,000 jobs in June, compared with the 175,000 expected by economists surveyed by Reuters. The unemployment rate edged higher to 4.9 percent from May's 4.7 percent, coming slightly above the the 4.8 percent expected.

Despite the better-than-expected jobs report for June, analysts said it wouldn't be enough to push the U.S. Federal Reserve to raise interest rates.

"Abstracting from monthly noise, jobs growth averaged a solid 147,000 a month over the last three months, telling us that the U.S. economy is doing well," Shane Oliver, head of investment strategy and chief economist at AMP Capital, said in a Friday note after the report.

But Oliver added, "The Fed will probably still want to see more evidence that U.S. growth has picked up sustainably and that global risks post Brexit are settling down and so won't be rushing to raise rates soon particularly with wages growth remaining low."

In the currency market, the dollar traded near a four-month high at 96.670 against a basket of currencies on Monday afternoon Asia time. In the immediate aftermath of the jobs report on Friday, the dollar index spiked momentarily to near the 96.500 level before retreating back to levels just above 96, similar to where it was before the release.

Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, said in a Friday note that foreign exchange traders were not convinced by the better-than-expected June jobs report and were eyeing the downward revision of the weak May numbers. The already weak payrolls growth from May was revised even further downward, to 11,000.

"There's no reasonable case for a rate hike before the end of the year," said Lien. She added that continued Brexit risks, U.S. retail sales data, Chinese trade and gross domestic product (GDP) numbers due this week would mean another "volatile week for the greenback."

In Japan, exporters rallied despite the yen's relative strength, with Toyota closing up 4.87 percent, Nissan up 5.23 percent and Sony up 3.98 percent.

At least one analyst shrugged off the recent climb in the yen, saying it was not due to safe-haven demand, which would have hurt stocks.

"The upward pressure on the yen is being driven by Japanese asset managers raising long yen hedges on foreign portfolio investment," Brown Brothers Harriman strategists said in a note Sunday.

"Japanese corporations who retained foreign earnings in high yielding foreign currency securities may also be increasing hedges. In effect, the yen strength is the unwinding of the substantial yen short that Japanese institutional investors and corporations had amassed during the early days of Abenomics," the strategists said.

Nintendo rocketed up 24.52 percent to close at 20,260 yen a share, as the launch of its Pokemon GO smartphone game met with raging sales.

The initial public offering price for Line Corp., a subsidiary of South Korean internet company Naver, was set at 3,300 yen per share, at the top of the range, according to a Reuters report. Naver shares closed up 0.53 percent.

In Hong Kong, CDB Leasing made its trading debut at HK$1.96, compared with its initial public offering price set at HK$1.90, the bottom of its indicative range.

Oil prices were lower during Asian hours, with global benchmark Brent down 0.75 percent at $46.41 a barrel, while U.S. crude futures dropped 0.99 percent to $44.96.

Major U.S. indexes closed higher on Friday, with the Dow Jones industrial average closing up 250.86 points, or 1.40 percent, at 18,146.74. The S&P 500 closed up 32.00 points, or 1.53 percent, at 2,129.90, while the Nasdaq composite added 79.95 points, or 1.64 percent, to 4,956.76.

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