ASIAN MARKETS: ECB bond buying plan buoys investors
Asian markets surged and the euro broke the 100 yen barrier on Friday after the European Central Bank (ECB) unveiled a plan to buy troubled euro zone nations’ bonds in a bid to tackle the region’s debt crisis.
The bullish sentiment fuelled by ECB chief Mario Draghi’s announcement was increased by US data showing many more jobs than expected had been created in the private sector last month, lifting hopes for the world’s number one economy, which will unveil official unemployment figures for August later on Friday.
Tokyo surged 2.20 per cent, or 191.08 points, to close at 8,871.65, Seoul climbed 2.57 per cent, or 48.34 points, to close at 1,929.58 and Sydney rose 0.30 per cent, or 12.9 points, to 4,325.8.
Hong Kong jumped 3.09 percent, or 592.86 points, to 19,802.16 and Shanghai soared 3.70 per cent, or 75.84 points, to 2,127.76.
Draghi said late on Thursday that the ECB would buy unlimited amounts of debt from troubled nations such as Spain and Italy in order to lower their cost of borrowing and help them get back on their feet -- a scheme named “Outright Monetary Transactions”.
The OMTs “will enable us to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro”, Draghi said.
“We will do whatever it takes” to keep the eurozone together, he added.
However, he said the purchases would depend on those countries asking for bailout cash and agreeing to undertake economic reforms.
The announcement “exceeded market expectations, which hasn’t happened for a long time,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole in Hong Kong.
“It draws a line, for a while at least, under the issue of peripheral European debt,” he told Dow Jones Newswires.
The yield on benchmark 10-year Spanish bonds fell late Thursday to 6.0 percent, compared with close to 7.0 percent at the start of the week, while Italy’s borrowing costs were at 5.2 percent, down from 5.7 percent days ago.
On forex markets the euro rallied to two-month highs against the yen and US dollar.
It jumped above the 100 yen level for the first time since July 5, hitting 100.14 in afternoon Tokyo trade, up from 99.60 yen late Thursday in New York.
The common currency also rose to a two-month high of US$1.2677, from US$1.2629 on Thursday.
The US dollar also rose Friday, to 78.92 yen from 78.85 yen.
In the United States figures from payrolls company ADP Thursday showed private-sector employment rising by 201,000 in August, after an upwardly revised July gain of 173,000.
The jobs number was well above the average forecast of 143,000, and showed a strong increase of 29,000 in the key service sector from July, to 185,000.
Also lifting sentiment were figures from the Institute for Supply Management Thursday showing its monthly purchasing managers index for the services sector rose to 53.7 from 52.6 in July, scotching worries of a downturn. A reading above 50 indicates growth.
On Wall Street the Dow climbed 1.87 per cent on Thursday and the S&P 500 advanced 2.04 per cent -- both to their highest levels since December 2007. The Nasdaq surged 2.17 per cent.
Eyes are now on non-farm payrolls data to be released later Friday, which traders said were also “pointing to quite a strong read as well”.
On oil markets New York’s main contract, light sweet crude for delivery in October slipped three cents to US$95.51 a barrel and Brent North Sea crude for October rose 18 US cents to US$113.67.
Gold was at US$1,694.90 at 0815 GMT compared with US$1,708.24 on Thursday.
In other markets:
-- Taipei rose 1.34 per cent, or 98.19 points, to 7,424.91, Manila closed 0.99 per cent higher, adding 51.21 points to 5,201.32 and Wellington closed 0.78 percent, or 28.64 points, higher at 3,722.18.