BCN-02-03Asian markets recover with euro as Italy fears ease

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ASIA-MARKETS

Asian markets recover with euro as Italy fears ease

HONG KONG, May 31, 2018 (BSS/AFP) – Asian equities bounced back Thursday
from the previous day’s mauling while the euro held on to a recovery as fears
of turmoil in Italy were soothed by conciliatory noises from the country’s
two biggest populist parties.

The head of the anti-establishment Five Star Movement said he was prepared
to offer a compromise candidate for the finance ministry after President
Sergio Mattarella’s decision to veto an avowed eurosceptic led to the
collapse of the fledgling coalition government.

Later, the rightwing League’s leader was said to be willing to discuss the
issue.

Wednesday’s news provided relief to global markets that were sent spinning
by the crisis in Italy — the eurozone’s third biggest economy — which many
feared could lead to fresh elections that could essentially become a
referendum on euro membership.

US and European markets rallied while the euro, which was wallowing around
10-month lows against the dollar, surged, helped by a surprise surge in
German inflation.

“What a difference a day makes,” said Greg McKenna, chief markets
strategist at AxiTrader. “My hypothesis that the players… got the shock of
their lives from the market’s reaction to their posturing and the turmoil
that ensued has proved correct.”

“Italy may not be headed for a summer election. And that means the EU may
not face a referendum on its future. Phew, storm in a teacup, nothing to see
here, move along, please. At least that’s the take markets appear to go with
last night.”

The gains continued in Asia, with Tokyo ending the morning session 0.4
percent higher, while Sydney added 0.5 percent, Singapore climbed 0.7 percent
and Seoul put on 0.5 percent.

Hong Kong added 0.5 percent and Shanghai gained 0.8 percent, supported by
data indicating a bigger-than-expected rise in Chinese factory activity in
April. Wellington, Taipei, Manila, Kuala Lumpur and Jakarta were also
comfortably higher.

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– Volatility warning –

Oil prices were down slightly but holding up after they also rallied
Wednesday in response to a report that said OPEC would likely lift output
gradually, soothing concerns about a new supply glut.

Crude markets have been hammered since OPEC kingpin Saudi Arabia and
Russia last week indicated they could lift a cap on production, which has
supported prices for two years, as an oversupply crisis eases.

Investors are now looking forward to the release Friday of key US jobs
figures, which could provide some idea about the Federal Reserve’s plans for
raising interest rates.

Payrolls firm ADP estimated US private sector job growth at 178,000 in
May, down from 204,000 in April and slightly below analysts’ expectations.

However, while sentiment is positive, analysts warned that ongoing
geopolitical issues and the unresolved China-US trade row continue to dog
trading floors.

“We are going to be filled with tremendous uncertainty over the course of
the summer,” David Ader, chief macro strategist at Informa Financial
Intelligence, told Bloomberg Television.

“If you look at things like the various economic surprise indices out
there they have been slowing down, but on the other hand you still have a Fed
hike coming in June. I see a lot of uncertainty, which results in a lot of
volatility.”

– Key figures around 0300 GMT –

Tokyo – Nikkei 225: UP 0.4 percent at 22,112.22 (break)

Hong Kong – Hang Seng: UP 0.5 percent at 30,213.25

Shanghai – Composite: UP 0.8 percent at 3,065.35

Euro/dollar: DOWN at $1.1658 from $1.1664 at 2100 GMT

Pound/dollar: UP at $1.3293 from $1.3281

Dollar/yen: DOWN at 108.60 yen from 108.91 yen

Oil – West Texas Intermediate: DOWN 32 cents at $67.89 per barrel

Oil – Brent Crude: DOWN 40 cents at $77.10 per barrel

Milan – FTSE MIB: UP 2.1 percent at 21,797.82 (close)

New York – Dow Jones: UP 1.3 percent at 24,667.78 (close)

London – FTSE 100: UP 0.7 percent at 7,689.57 (close)

BSS/AFP/HR/0955