Asian markets heartened by Bear Stearns deal
SINGAPORE: Asian shares climbed Tuesday and the dollar held its gains, after JPMorgan Chase raised its bid for Bear Stearns and U.S. home sales rose unexpectedly, lifting expectations for a recovery in the U.S. housing and credit markets.
Japanese government bond futures retreated, pulling away from last weeks five-year highs, after U.S. Treasuries slid on tentative hopes the worlds top economy would weather the credit crisis.
Financial stocks, from Kookmin Bank in South Korea to Babcock Brown in Australia, rang up big gains after JP Morgans sweetened offer for Bear Stearns signaled there was more value in financial assets than previously thought.
MSCIs index of shares outside Asia rose 1.9 percent by midday, the third day of gains, although the benchmark is still down around 16 percent this year.
Stocks on Wall Street rallied on Monday after a long Easter holiday weekend, with the Dow Jones industrial average rising 1.5 percent and the Nasdaq Composite Index gaining 3 percent.
Better-than-expected U.S. housing data also helped to lift optimism over the economic outlook.
“If theres even a hint that the U.S. housing slump might be coming to an end, and combined with an improved offer for Bear Stearns, it gives people hope that maybe the darkest period is over,” said Hans Kunnen, head of investment markets research at Colonial First State in Sydney.
“But the market is just operating like a yo-yo within a band. I refuse to get carried away.”
The Nikkei index in Tokyo ended the morning 1.3 percent better as Canon and other exporters climbed as the yen traded well below a near 13-year high posted last week against the dollar, easing some concern about earnings outlooks.
The dollar trading above 100 yen “makes a lot of difference for investor sentiment,” said Katsuhiko Kodama, senior strategist at Toyo Securities.
The benchmark Kospi in Seoul added 1.1 percent, the SP/ASX 200 in Sydney rose 3 percent, and the Straits Times in Singapore climbed 1.9 percent.
June 10-year JGB futures fell 0.34 point to 140.31, pulling away from a five-year peak of 142.00 hit last week.
The benchmark 10-year JGB yield rose 1 basis point to 1.265 percent staying above a three-year low of 1.230 percent hit last Monday.
In the currency markets, the dollar crept up to 100.76 yen, holding near the previous sessions highs hit after data showed that sales of existing U.S. home sales rose in February for the first time since July.
The dollar had plunged to as low as 95.77 yen last week, its lowest since 1995, amid the Federal Reserves aggressive efforts to ease the credit crisis.
Oil fell more than $1 to below $100 a barrel, extending a 10 percent fall from last weeks record, sent down by a buildup in U.S. crude stocks, concerns over slower energy demand and a recovering dollar.
U.S. light crude for May delivery was down 87 cents at $99.98 a barrel.
“There is a realization in the market that the fundamentals really dont justify prices to be so far above $100. One of the key factors is the recent buildup in U.S. stockpiles and the stocks are looking pretty healthy at this stage,” said Gerard Burg, a resource analyst at the National Australia Bank.
Gold dropped and held near its lowest in a month, with its appeal as a hedge against inflation weakened by a firming U.S. dollar and sliding crude oil prices.
Gold fell to $920.40/921.20 an ounce, and was within sight of last weeks one-month low of $904.65 an ounce.
