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June 28, 2017

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Asian stocks gain on US data, Russia sanctions

BEIJING/HONG KONG--Asian stocks advanced Tuesday on stronger U.S. factory production and relief that sanctions imposed on Russia following the Crimea reference avoid its vital economic interests. European markets were down.

In Europe, Germany's DAX shed 0.4 percent to 19,139.24 and France's CAC-40 lost 0.1 percent to 4,268.46. Britain's FTSE 100 fell 0.2 percent to 6,553.50. Futures augured a pullback on Wall Street. Dow futures and S&P 500 futures were both down 0.2 percent.

Sentiment in Asia was buoyed by Federal Reserve data showing U.S. factory production in February rose at its fastest rate in six months. That reinforced expectations the Fed will go ahead with a third planned reduction of its stimulus, cutting monthly bond purchases by US$10 billion to US$55 billion.

"U.S. industrial production rose at its fastest pace in six months, suggesting that activity is reverting to normal after being hampered by a period of cold weather," said Mizuho Bank in a report.

That added to relief that penalties imposed by Washington and Europe over the referendum in the Ukrainian region of Crimea avoided measures that might disrupt Russian economic activity.

"The Ukraine situation remains delicate, but at least has not spilled over into violence, despite the opposition by Western powers," said Daiwa Securities senior strategist Tsuyoshi Nomaguchi.

However, Kathy Lien of BK Asset Management, said: "The bottom line is that it is very difficult to be optimistic under these circumstances because of the material risk that the crisis in the Ukraine will deepen."

Western governments imposed travel bans and asset freezes on 21 people from Russia and Crimea seen as playing key roles in organizing what they consider an unlawful vote.

"The West will likely keep to its stance of targeted sanctions on individuals instead of broad-based economic sanctions to avoid harming deep economic ties with Russia," said Mizuho.

In Asian markets, Tokyo rose 0.94 percent, or 133.60 points, to 14,411.27, Seoul added 0.66 percent, or 12.68 points, to close at 1,940.21 and Sydney advanced 0.51 percent, or 27.0 points, to 5,344.6.

Hong Kong climbed 0.51 percent, or 109.55 points to 21,583.50 while Shanghai closed flat, edging up 1.52 points to 2,025.20.

After last week's heavy sell-off in New York, U.S. shares bounced back on Monday. The Dow jumped 1.13 percent, the S&P 500 gained 0.96 percent and the Nasdaq added 0.81 percent.

U.S. traders were buoyed by data showing industrial output increased more than expected in February, adding to a growing feeling that the world's number one economy is on a recovery track.

The Fed begins a two-day policy meeting Tuesday that analysts forecast will see a further cut in its stimulus program.

Gold fetched US$1,362.05 an ounce at 1050 GMT compared with US$1,378.76 late Monday.

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