Trump-Zelensky meeting ahead, Fed rate outlook in focus - what’s moving markets
* Oil surges after reports Iran officials killed in U.S. air
strike
* Brent crude up 1.74%
* MSCI Asia ex-Japan +0.4%
* China easing, positive China, Korea data seen supporting
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Andrew Galbraith
SHANGHAI, Jan 3 (Reuters) - Asian shares extended their New
Year's rally on Friday after Wall Street struck another record
high on fresh Chinese stimulus while oil spiked after U.S. air
strikes in Iraq heightened geopolitical tensions.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS touched its highest point since June 15, 2018 in
early trade, but later pared gains. It was last up 0.31%.
The index had finished at its highest close in more than 18
months on Thursday, lifted by a New Year's Day announcement from
China's central bank that it would cut the amount of cash that
banks must hold as reserves, releasing release around 800
billion yuan ($114.87 billion). Against the backdrop of a thaw in trade relations between
the United States and China, global markets have seen renewed
appetite for risk assets.
"You have from both a policy and trade perspective a
favourable framework for ... risk assets for the weeks to come,"
said Frank Benzimra, head of Asia equity strategy at Societe
Generale in Hong Kong.
"The issue in our view, and that is the central scenario, is
beyond these few weeks - where could we see a further
correction?" he said, noting that the United States is unlikely
to enjoy further fiscal stimulus before the presidential
election in November.
But in an a fresh blow to stability in the Middle East,
Iranian Major-General Qassem Soleimani, head of the elite Quds
Force, and Iraqi militia commander Abu Mahdi al-Muhandis were
killed early on Friday in an air strike on their convoy at
Baghdad airport, an Iraqi militia spokesman told Reuters.
U.S. officials told Reuters that strikes had been carried
out against two targets linked to Iran in Baghdad. The news sent oil prices surging, with global benchmark
Brent crude LCOc1 shooting 1.74% higher to $67.40 per barrel
and U.S. West Texas Intermediate crude CLc1 jumping 1.60% to
$62.16 per barrel. News of the strikes came after U.S. Defense Secretary Mark
Esper said on Thursday there were indications Iran or forces it
backs may be planning additional attacks after Iranian-backed
demonstrated hurled rocks at the U.S. embassy in Baghdad
following American strikes on Sunday against bases of the
Tehran-backed Kataib Hezbollah group.
Esper warned that the "game has changed" and it was possible
the United States might have to take preemptive action to
protect American lives. Equity markets remained unfazed as investors took further
support from data on Thursday showing factory activity in China
continued to grow at a solid pace in December, and that business
confidence improved.
South Korean factory activity also improved in December,
returning to growth after seven straight months of contraction.
"The South Korea data, a bellwether for global
trade and technology, shines a massive ray optimism confirming
that the rebound in the world economy is taking place, which is
being viewed in an extremely positive light by global
investors," Stephen Innes, strategist at AxiTrader, said in a
note.
South Korean shares .KS11 added 0.28% on Friday.
China's CSI300 index, one of the world's best-performing
indexes last year, was 0.15% higher. Australian shares .AXJO
added 0.97%.
Markets in Japan remain closed for a national holiday.
Overnight, Wall Street's major indexes notched record highs
in their first session of the decade. The Dow Jones Industrial
Average .DJI rose 1.16% to 28,868.8. The S&P 500 .SPX gained
0.84% to 3,257.85 and the Nasdaq Composite .IXIC added 1.33%
to 9,092.19.
The more optimistic outlook for trade and expectations that
U.S. outperformance will gradually wane continued to depress the
U.S. dollar, which fell 0.42% against the yen to 108.11. JPY=
The greenback also fell against the euro, which added 0.03%
to $1.1174.
The dollar index .DXY , which tracks the dollar against a
basket of six major rivals, was down 0.11% at 96.735.
A weak dollar continued to burnish the value of gold,
driving the precious metal 0.5% higher on the spot market XAU=
to $1,536.54 per ounce. GOL/
($1 = 6.9642 Chinese yuan)