Asian equities bounced back Thursday, tracking overnight U.S. gains following a deal to extend the federal government's borrowing limit for three months, though the rise narrowed later in the session.
Recent tensions in the Korean Peninsula were a trigger for investors to take profit from this year's robust gains, with stock indexes in markets like Hong Kong, South Korea, India and Singapore notching double-digit increases.
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Korea's Kospi led regional gains, rising 1.1%, as attention--for now--shifted away from North Korea. The rebound came after five consecutive trading sessions in the red, to mark its longest losing streak since April. Elsewhere in the region, both Hong Kong's Hang Seng Index and Singapore's Straits Times Index were up just 0.1%, paring back from earlier gains.
On Wednesday, U.S. stocks rose after President Donald Trump backed a deal with congressional Democrats to attach hurricane relief money to a three-month extension of both government funding and the debt limit.
The surprise deal suggests Mr. Trump could show more flexibility on other spending initiatives with the Democrats, analysts say.
"Trump reaching across the aisle is an extraordinary development," said Michael McCarthy, chief market strategist at CMC Markets. However, the deal is a short-term fix, adding pressure on the government as the new deadline of Dec. 15 looms, he cautioned.
While developed markets could see some pullback from the recent strength, emerging markets mostly in Asia appear more resilient and could enter "a period of outperformance," said Mr. McCarthy.
Meanwhile, the market's focus will be shifting to the European Central Bank's monetary policy meeting later in the day, where President Mario Draghi is widely expected to comment on the ECB's winding down of its $2.7 trillion stimulus program. Nonetheless, any such move may not begin until next month, say analysts.
In Japan, the Nikkei Stock Average was up 0.2%, also dialing back gains from the morning, though a recovery in the U.S. dollar against the yen helped boost export stocks. The dollar was recently buying 109.07 yen, compared with 108.72 yen at the end of stock-market trading Wednesday.
A weaker yen helps exporters because it makes their goods competitive and pads up foreign earnings. Automotive stocks were among the best performers in Tokyo trading, with Mitsubishi Motors rising 1.7%, while Toyota added 1.1% and Honda Motor rose 1.2%.
Stocks in Korea were driven by the 2% rise in index heavyweight Samsung Electronics, amid a favorable outlook on demand for its organic light-emitting diode, or OLED, screens. There was market chatter that the electronics giant is the sole supplier of OLEDs to the high-end version of Apple's new iPhone, to be unveiled next week.
Bucking the region's gains, however, were stocks in mainland China, which continue to move sideways as investors await new policy guidance from the government ahead of a major leadership summit next month. After ending Wednesday's trade at a fresh 20-month high, the Shanghai Composite Index was down 0.1% in the morning session, narrowing the week's gain to 0.4%.
Still, some Chinese companies that operate abroad will likely benefit from a stronger yuan against the U.S. dollar, said Alexander Lee, chief investment officer at Hong Kong-based Nimbus Capital Group. On Thursday, the Chinese central bank fixed the currency's trading midpoint to the dollar at a fresh 16-month high.
Write to Kenan Machado at firstname.lastname@example.org
(END) Dow Jones Newswires
September 07, 2017 01:19 ET (05:19 GMT)