RandomGuy
11-05-2008, 04:05 AM
HONG KONG (Reuters) – Asian shares hit a three-week high and the dollar extended gains as Barack Obama became the next U.S. president, ending uncertainty about who will lead the world's largest economy in the midst of great financial peril.
But Asian stocks pared gains and European shares were set to open slightly lower, with analysts saying a victory for Obama had been largely priced in after recent rises and concerns about the health of the global economy still paramount.
U.S. Treasuries fell as investors became bolder in taking risk, but oil succumbed to profit-taking after signs of global production cuts had sent crude prices up 10 percent on Tuesday. Gold fell more than 1 percent on the firmer dollar.
The new Obama administration, which takes office in January, will face the world's worst financial crisis since the Great Depression, and a potentially steep slowdown in global growth that has pounded markets from Tokyo to Frankfurt to New York.
"The market was putting in an Obama bounce earlier today, and we are seeing a continuation of that rally around the world," said Peter Kenny, managing director at Knight Equity Markets in New Jersey.
"Clearly the market was anticipating a fairly substantial referendum on change and an Obama presidency and a different path. The market called it and the market was right," he said.
But some also urged caution despite unprecedented measures to rescue banks across the world, aggressive rate cuts by central banks, and the improvements in credit markets that have in the last week given global markets a respite from a thrashing.
"The knee-jerk complacency rally in Asia to an Obama win is likely creating an opportunity to sell," said Kirby Daley, a senior strategist for Newedge Group in Hong Kong.
"The bottom line is economic fundamentals in the U.S. are deteriorating faster than the market can keep up with. And there is very little an Obama administration can do to shield Asia from the effects of this downturn."
The MSCI index of Asian stocks outside Japan rose for a seventh consecutive session on Wednesday, and was up 2.5 percent gain as of 0700 GMT, after earlier hitting the highest since October 16.
The gains came after U.S. stocks on Tuesday enjoyed their biggest election day rally ever.
Tokyo's Nikkei rose 4.5 percent, led by exporters such as Honda Motor Co that were bolstered by a softer yen, while energy-linked firms such as Mitsubishi Corp gained on the overnight oil price rally.
Markets in Hong Kong, Singapore and Shanghai rose more than 3 percent, while stocks in Australia and South Korea gained over 2 percent.
But shares in Taiwan and India declined.
DOLLAR ADVANCES
In a sign that investors may be more willing to add risk, U.S. Treasury prices fell after Obama's win. The 2-year note's price traded down 3/32 for a yield of 1.44 percent.
The dollar advanced following Obama's election, recovering some of the prior day's losses that saw the currency suffer its biggest one-day slide in 13 years as investors went searching for higher yielding currencies.
"(Obama's win) is arguably likely to prove more positive for foreign markets given the perception that he will be stronger in terms of dealing with U.S. economic problems, is seen more favorably by foreigners generally, and is less likely to follow the policies of President Bush," Calyon said in a report.
The dollar rose 0.8 percent against a basket of major currencies to 85.268 after falling around 2.5 percent on Tuesday for its biggest one-day drop in 13 years.
The euro slid 1.0 percent to $1.2855 on trading platform EBS.
The dollar dipped 0.2 percent against the yen to 99.50 yen. Traders said dollar selling by Japanese exporters and profit-taking supported the yen.
Oil remained lower after the U.S. presidential election, with crude down $1.50 to $69.05 a barrel as investors took profits after a spike on Tuesday following signs that Saudi Arabia and other OPEC members had made promised cuts in crude production.
Other commodities also fell. Gold was trading at $750.75 an ounce, down $11.20 from its notional New York close on Tuesday when it had rallied around 5 percent on the back of a dollar slide.
(Editing by Dhara Ranasinghe)
But Asian stocks pared gains and European shares were set to open slightly lower, with analysts saying a victory for Obama had been largely priced in after recent rises and concerns about the health of the global economy still paramount.
U.S. Treasuries fell as investors became bolder in taking risk, but oil succumbed to profit-taking after signs of global production cuts had sent crude prices up 10 percent on Tuesday. Gold fell more than 1 percent on the firmer dollar.
The new Obama administration, which takes office in January, will face the world's worst financial crisis since the Great Depression, and a potentially steep slowdown in global growth that has pounded markets from Tokyo to Frankfurt to New York.
"The market was putting in an Obama bounce earlier today, and we are seeing a continuation of that rally around the world," said Peter Kenny, managing director at Knight Equity Markets in New Jersey.
"Clearly the market was anticipating a fairly substantial referendum on change and an Obama presidency and a different path. The market called it and the market was right," he said.
But some also urged caution despite unprecedented measures to rescue banks across the world, aggressive rate cuts by central banks, and the improvements in credit markets that have in the last week given global markets a respite from a thrashing.
"The knee-jerk complacency rally in Asia to an Obama win is likely creating an opportunity to sell," said Kirby Daley, a senior strategist for Newedge Group in Hong Kong.
"The bottom line is economic fundamentals in the U.S. are deteriorating faster than the market can keep up with. And there is very little an Obama administration can do to shield Asia from the effects of this downturn."
The MSCI index of Asian stocks outside Japan rose for a seventh consecutive session on Wednesday, and was up 2.5 percent gain as of 0700 GMT, after earlier hitting the highest since October 16.
The gains came after U.S. stocks on Tuesday enjoyed their biggest election day rally ever.
Tokyo's Nikkei rose 4.5 percent, led by exporters such as Honda Motor Co that were bolstered by a softer yen, while energy-linked firms such as Mitsubishi Corp gained on the overnight oil price rally.
Markets in Hong Kong, Singapore and Shanghai rose more than 3 percent, while stocks in Australia and South Korea gained over 2 percent.
But shares in Taiwan and India declined.
DOLLAR ADVANCES
In a sign that investors may be more willing to add risk, U.S. Treasury prices fell after Obama's win. The 2-year note's price traded down 3/32 for a yield of 1.44 percent.
The dollar advanced following Obama's election, recovering some of the prior day's losses that saw the currency suffer its biggest one-day slide in 13 years as investors went searching for higher yielding currencies.
"(Obama's win) is arguably likely to prove more positive for foreign markets given the perception that he will be stronger in terms of dealing with U.S. economic problems, is seen more favorably by foreigners generally, and is less likely to follow the policies of President Bush," Calyon said in a report.
The dollar rose 0.8 percent against a basket of major currencies to 85.268 after falling around 2.5 percent on Tuesday for its biggest one-day drop in 13 years.
The euro slid 1.0 percent to $1.2855 on trading platform EBS.
The dollar dipped 0.2 percent against the yen to 99.50 yen. Traders said dollar selling by Japanese exporters and profit-taking supported the yen.
Oil remained lower after the U.S. presidential election, with crude down $1.50 to $69.05 a barrel as investors took profits after a spike on Tuesday following signs that Saudi Arabia and other OPEC members had made promised cuts in crude production.
Other commodities also fell. Gold was trading at $750.75 an ounce, down $11.20 from its notional New York close on Tuesday when it had rallied around 5 percent on the back of a dollar slide.
(Editing by Dhara Ranasinghe)