Financial Institutions Lead Gains in Asian Shares -- Update

By Kenan Machado Features Dow Jones Newswires

Equity markets in Asia were higher Thursday, with finance stocks broadly leading gains after all major U.S. financial institutions received approval from the Federal Reserve to ramp up dividend payouts and share buybacks.

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This is the first time since the annual tests began after the 2008 financial crisis that all firms got passing grades, a sign, analysts say, of resilience in big banks and the U.S. financial system.

It paves the way for U.S. banks to increase dividend payouts and share buybacks to their highest levels in years, providing investors with confidence to invest in high-growth assets like technology stocks.

Australia's S&P/ASX 200, coming off its best day in two weeks, was up 1.1%, with large banks among the big gainers: Macquarie Group and Westpac rose 2.1%; National Australia Bank, 2%.

Big banks boosted Hong Kong shares as well, helping the Hang Seng Index to a 0.9% gain at the midday break. HSBC surged 3.9% to a 22-month high after a 20% price-target upgrade by Morgan Stanley, in anticipation of the lender's plans for its excess capital. Standard Chartered was up 3.2%.

Overnight gains in U.S. technology shares were also lifting shares of their key Asian counterparts on Thursday. Korea's Samsung Electronics rose 1.1%, SoftBank Group gained 1% in Tokyo and Hong Kong index heavyweight Tencent rose 0.7%.

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In China, share gains were more modest, with brokers pointing to reduced liquidity, following the sixth consecutive session that the People's Bank of China has stopped liquidity injections to the market. The Shanghai Composite Index was up 0.3% in the morning session.

Crude-oil prices rose despite an increase in U.S. stockpiles. The front-month futures for Brent crude, the international benchmark, gained 0.3% in Asia.

"You know you are back in a market with a bullish bent when [U.S. oil-inventory data] is ignored," said Greg McKenna, chief market strategist at AxiTrader.

Japan's Nikkei Stock Average was up 0.5% despite giving up some early gains on a stronger yen. The dollar was down 0.1% at Yen112.26, tracing back on early gains.

The U.S. dollar broadly extended earlier declines in morning Asian trade, with the euro and the pound gaining 0.2% against it. Overnight, the dollar pulled back in New York action, sending the WSJ Dollar Index--a broad gauge of the currency's value--to its second-lowest level of the year.

The dollar's decline comes as central bankers from Europe, the U.K. and Canada hint that they are moving closer to withdrawing their massive stimulus programs. Analysts said there was also speculation that weak U.S. inflation would stay the Fed's hands in raising rates.

"The markets are inclined to believe that the Fed is likely to be on hold," said Sean Callow, a senior strategist at Westpac in Sydney.

While comments from the central banks indicated improving economic conditions and a global pickup in demand, it would take them some time to actually raise real rates, said Colin Graham, chief investment officer of multiasset solutions at BNP Paribas Asset Management.

For now, "central banks may be seeking to reduce the leverage in the market," said Mr. Graham.

John Wu contributed to this article.

Write to Kenan Machado at kenan.machado@wsj.com

Global stocks continued to rally as bonds sold off Thursday, on the back of signs that central bankers are confident enough about economic growth to start tightening monetary policy.

The Stoxx Europe 600 was up 0.2% in early European trade and futures pointed to an 0.2% opening gain for the S&P 500. In Asia, Japan's Nikkei Stock Average gained 0.5%, Hong Kong's Hang Seng gained 1% and Australia's S&P/ASX 200 rose 1.1%.

Around the world, gains were led by bank shares, which are one of investors' favorite assets to bet on higher growth and inflation. Europe's banking sector was up 1.5% in the morning. The financial sector got a further bump Wednesday, when all major U.S. financial institutions received approval from the Federal Reserve to ramp up dividend payouts and share buybacks.

Meanwhile, sovereign bond yields across the developed world kept edging up. Bond yields move opposite to prices. The euro and the pound also kept powering ahead and were up 0.4% and 0.5% against the U.S. dollar respectively.

Investors were already broadly confident on economic growth, but global inflation has remained weak, leading markets to doubt whether policy makers will be able to start rolling back their easy-money policies. A raft of statements Wednesday by policy makers at the European Central Bank, the Bank of England and the Bank of Canada, however, convinced many that the progressive end of monetary stimulus is coming nearer.

Still, analysts said there was also speculation that weak U.S. inflation would stay the Fed's hands in raising rates.

"The markets are inclined to believe that the Fed is likely to be on hold," said Sean Callow, a senior strategist at Westpac in Sydney.

The positive reaction of the market to central bankers' comments fuels hopes that stocks can continue rallying, investors said, especially if President Donald Trump is able to deliver on his pledge to cut taxes for corporations.

"If we see that the tax cuts are moving along and people see they are being implemented, this will continue being an upward bias in the market, " said Myra Natter, wealth adviser at Titus Wealth Management.

Crude-oil prices joined the global rally despite data showing an increase in U.S. stockpiles. The front-month futures for Brent crude, the international benchmark, gained 0.9% to trade at $47.95 the barrel.

Write to Jon Sindreu at jon.sindreu@wsj.com and Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

June 29, 2017 04:00 ET (08:00 GMT)