Asian Stocks Surge on U.S Factory Data and Stimulus Optimism

on Jul 2, 2012

On Tuesday (July 3) Asian stocks headed for their longest winning streak this year. Japan’s Nikkei 225 index rose 0.7 per cent to 9066.59 and South Korea’s Kospi gained 0.9 per cent to 1867.821. Australia’s S&P/ASX 200 inched up to 4,134. Chinese shares outperformed in Asia, with Hong Kong’s Hang Seng index rising 1.6 per cent to above its 200-day moving average, catching up on Friday’s global rallies after a holiday the previous session. Meanwhile the China Shanghai Composite edged 0.1 per cent higher at 2229.19.

Financial companies accounted for the largest gains on the Asian regional benchmark gauge. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, advanced 2.6 per cent, leading gains among financial firms. Agricultural Bank of China Ltd. advanced 2.9 per cent in Hong Kong. Nomura Holdings Inc., Japan’s largest brokerage, climbed one per cent. Canon Inc., a camera maker that gets about 31 per cent of sales from Europe, climbed 1.4 per cent in Tokyo. Tencent Holdings Ltd. led technology stocks higher in Hong Kong after Micron Technology Inc. agreed to buy Elpida Memory Inc. in the memory-chip industry’s largest consolidation in four years.

!m[](/uploads/story/128/thumbs/pic1_inline.png)The significant surge of the Asian stocks this week is due to the expectations that major central banks will take further policy steps to support the fragile economy, after manufacturing data around the world highlighted the drag on growth from the protracted euro zone debt crisis. Monday’s data showing U.S. manufacturing activity contracted for the first time in nearly three years raised speculation that the Federal Reserve will again step in to boost the economy and support Wall Street. Many market players believe continued economic weakness will push the Fed into a third bout of quantitative easing (QE) – the policy of creating money to fund asset purchases that has lifted riskier assets such as shares and

commodities in the past.
Traders also expected the European Central Bank to cut lending rates and the Bank of England to boost money in circulation at a scheduled meeting later this week. There are also hopes that Japan and China will bolster the global policy response with stimulus measures of their own.
“There will be more monetary easing, be it in Europe, from the Fed or in China,” said Robert Aspin, Singapore-based investment strategist at Standard Chartered Bank. “We are overweight


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