Asian Markets Edge Higher After BOJ Stimulus

Currency Hedger Trading Desk April 27, 2020

Asian stocks rose on Monday amid signs that the coronavirus outbreak is peaking and that countries around the world are beginning to ease restrictions put in place because of the pandemic.

Traders shifted their focus to a U.S. Federal Reserve meeting ending Wednesday and a European Central Bank (ECB) meeting on Thursday after the Bank of Japan ramped up its purchases of corporate debt to help ease funding strains.

Chinese shares eked out modest gains amid mixed catalysts. China reported just three new coronavirus cases today, and no new deaths for the 12th day in a row while a continued fall in industrial profits showed that the country is facing a continued fall in demand for goods from foreign economies due to Covid-19's impact on those economies' job markets and wages growth.

China's industrial profits declined 34.9 year-on-year in March following a 38.3 percent slump in January to February period, official data showed. In the first quarter, industrial profits declined 36.7 percent from the same period last year. The benchmark Shanghai Composite index rose by 6.97 points, or 0.25 percent, to 2,815.49, while Hong Kong's Hang Seng index ended up 448.81 points, or 1.88 percent, at 24,280.14.

Japanese shares posted strong gains as the Bank of Japan expanded its monetary stimulus for the second straight month to support economic and financial activities amid Covid-19.

The policy board, today unanimously decided to increase the maximum amount of additional purchases of commercial papers and corporate bonds and raised the upper limit of outstanding holdings to about JPY 20 trillion.

The central bank, meanwhile downgraded its inflation and GDP forecasts for the fiscal 2020.

Better-than-expected earnings from the likes of Advantest and Fanuc also boosted investor sentiment.

The Nikkei average jumped 521.22 points, or 2.71 percent, to 19,783.22, its highest closing since April 17. The broader Topix index closed 1.83 percent higher at 1,447.25.

Advantest Corp soared 8.4 percent after the chip-testing equipment supplier forecast a 14.2 percent year-on-year increase in operating profit for the April-June quarter. Industrial robot maker Fanuc Corp rallied 12 percent after a strong forecast for the April-September half.

Market heavyweight SoftBank gained 4.5 percent and Fast Retailing added 2.9 percent. Mitsubishi UFJ Financial rose 2.3 percent on reports that its unit MUFG Bank plans to cut its workforce by about 8,000 employees.

The New Zealand market was closed for the ANZAC Day holiday. Australian markets recovered from an early slide to finish sharply higher for the day.

The benchmark S&P/ASX 200 index climbed 78.80 points, or 1.50 percent, to 5,321.40, while the broader All Ordinaries index ended up 87.60 points, or 1.65 percent, at 5,388.30.

National Australia Bank shares were in a trading halt as the lender reported a 51 percent fall in half-year profit, slashed its dividend and sought an extra $3.5 billion of investment from shareholders. ANZ lost 2.3 percent and Westpac Banking Corp slumped 4.4 percent.

Mining heavyweights BHP and Rio Tinto edged down slightly while gold miners Evolution Mining, Regis Resources and Northern Star Resources rose about 3 percent.

Seoul stocks rebounded as the country reported only 10 new cases of the coronavirus, its 26th straight day below 100. The government is expected to announce a timeline for reopening schools no later than early May amid the slowing caseload.

The benchmark Kospi climbed 33.76 points, or 1.79 percent, to 1,922.77 on hopes for more policy support after the government said it would increase an aid package to 135 trillion won from the previously set 100 trillion won to help key industries disrupted by the Covid-19 pandemic.

Financials led the surge, with Shinhan Financial, a major banking group, climbing 10.5 percent after unveiling its first-quarter earnings results. Hana Financial shares surged as much as 16.9 percent.

U.S. stocks rose sharply on Friday as some states prepared to reopen their economies and oil prices climbed on expectations the U.S. may shrink production to make up for diminished demand and storage capacity.

Offsetting disappointing durable goods orders and consumer sentiment data, President Donald Trump signed a $484 billion stimulus package that will replenish a fund for small-business lending and direct money to hospitals and efforts to ramp up U.S. testing capacity in the fight against Covid-19.

The Dow Jones Industrial Average climbed 1.1 percent, the S&P 500 rallied 1.4 percent and the tech-heavy Nasdaq Composite jumped 1.7 percent.

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