Tokyo: Asian shares stepped back from a one-month
high on Thursday, tracking a retreat on Wall Street, while expectations
of credit easing by the European Central Bank knocked down yields on US
and European bonds.
MSCI’s broadest index of Asia-Pacific shares outside Japan dipped
0.1% from one-month high hit on Wednesday as Wall Street shares
retreated overnight from record highs hit the day before.
“Despite the modest decline in US equities on Thursday,
the mood in equity markets globally remains buoyant, with major indices
flirting with all-time highs and emerging equity markets rallying
strongly,” Barclays analysts said in a research note.
While shares prices saw limited moves, there was more
pronounced price action in the world’s largest bond markets, as
expectations of monetary easing by the ECB drove prices up and yields
down.
The central bank is preparing a package of policy options
for its June meeting, including cuts in all its interest rates, and
targeted measures aimed at boosting lending to small and mid-sized firms
The 10-year US Treasuries yields fell to six-month low of 2.5%, breaking out of a long-held range, and last stood at 2.5%.
The yield on 10-year German Bunds fell to a one-year low of 1.3% while Italian 10-year debt yielded a record low of 2.9%.
British government bond yields dropped to six-moth low of
2.5% when the Bank of England offered a surprisingly dovish monetary
policy outlook, even though the BoE was seen as likely to be one of the
earliest major central banks to raise interest rates sooner rather than
later.
The BoE pushed back against expectations it might raise
interest rates in less than a year’s time, leaving largely unchanged its
assumptions on the timing of interest rate rises even as it
acknowledged a strong recovery in the labour market.
“Their comments are extremely similar to what the Fed has
said. Yes, the jobless rate is falling faster but wages are not rising
much,” said
Tohru Yamamoto, chief fixed-income strategist at Daiwa Securities.
Small wage rises mean low inflationary pressure, allowing
central banks to maintain extremely easy monetary policy. “So you can
say that markets are now starting to expect a new normal, where wages do
not rise much (in developed countries). If even the BoE won’t raise
rates, the Fed probably won’t either,” Yamamoto added.
In the currency market, sterling, which had been rallying
so far this year on BoE expectations, fell to one-month low of $1.6753
and last stood at $1.6766.
The euro, on the other hand, stood not far from Tuesday’s
one-month low of $1.36885, having fallen two percent from 2 1/2-year
high just under $1.40 after ECB chief
Mario Draghi last week indicated his readiness to ease policy next month.
The Japanese yen gained 0.2% in early trade to ¥101.69 to
the dollar, after data showed Japan’s January-March GDP grew an
annualised 5.9%, beating market expectations of a 4.2% expansion.
The yen’s gains hurt Japanese shares, pushing down the Nikkei share average 1.4%.
But the impact of the data is likely to be short-lived,
given that growth was boosted by last-minute buying ahead of sales tax
hike in April and looks set to slow.
Later in the day, the euro zone will publish its first
quarter GDP data while in the United States, CPI and industrial output
figures are due. Reuters
RANJAY KUMAR
PGDM 2nd SEM
SOURCE- MINT
Bridge India US Equity Standard fund. 