Asian Shares Rally As ECB Plan Boosts Sentiment

07 Sep 2012

-- Asian markets higher on ECB bond-buying plan -- Nikkei up 1.8%, Hang Seng Index climbs 1.9%, S&P ASX 200 adds 0.5% -- U.S. dollar stabilizes against the euro, yen before U.S. jobs data (Adds information, quotes, updates/adds market levels) Stocks rallied in Asia Friday after European Central Bank President Mario Draghi Thursday presented a plan to tackle Europe's ongoing debt crisis. There was a broad movement into risk assets across the region. Japan's Nikkei jumped 1.8%, as local exporters were helped by a weaker yen - Canon climbed 2.3% and Sony was up 3.0%. South Korea's Kospi advanced 2.1% as investors bought technology, financial and automotive stocks. In Hong Kong, the Hang Seng Index was up 1.9%, while the Shanghai Composite added 2.5% in China. In Hong Kong, index heavyweight HSBC, which has large exposure to Europe, jumped 2.1%. Fashion retailer Esprit, which derives much of its revenue from Europe, pushed forward 3.1% Australia's S&P ASX 200 was up 0.5%, buoyed by strong performances in miners: BHP Billiton gained 2.0%, Rio Tinto added 3.2%, and Fortescue Metals Group bounced 5.4% from heavy losses in recent sessions. Markets have been waiting for Mr. Draghi to follow up on his pledge, made in late July, to do "whatever it takes" to save the euro. The plan gave stocks a shot in the arm, as markets in both the U.S. and Europe soared on the news. The ECB "exceeded market expectations, which hasn't happened for a long time. It draws a line, for a while at least, under the issue of peripheral European debt," said Dariusz Kowalczyk, senior economist and strategist for Asia ex-Japan at Credit Agricole in Hong Kong. The plan allows the ECB to buy the bonds of troubled euro-zone governments in the secondary market in order to lower their borrowing costs. The central bank plans to purchase bonds with maturities of between one and three years, and it will also require the countries involved to agree to a euro-zone program of budgetary discipline. "The ECB has confirmed that it is effectively willing to act as the lender of last resort under certain conditions. It is a small step forward but no silver bullet because it fails to address the real problems in Europe," said Matthew Sherwood, head of investment market research at Perpetual in Sydney, which has around $25 billion in assets under management, adding that "the global risk rally looks likely to show signs of fatigue before too long" Sentiment was also helped by positive economic data from the U.S., where activity in the service sector expanded in August against an expected decline and reports on the labor market exceeded expectations, which will help set the scene for the next major data point - U.S. nonfarm payrolls data, which will come out later in the global day, and could influence the Federal Reserve's policy meeting next week. There is also Chinese economic data for August due out over the weekend, which will be used to gauge the health of the world's second largest economy. The euro stabilized in Asia at $1.2630 after adding 0.3% overnight. The dollar was also little moved against the yen at Y78.90, after jumping 0.6% overnight, as investors moved out of the region's safe haven currency. The risk-on attitude was evident in other Asian currencies. The Australian dollar climbed to $1.03, and the dollar softened against the South Korean won, to KRW1,131 to the greenback. Write to Daniel Inman at Daniel.Inman@wsj.com TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAsia@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.