Global risk assets rebound on earnings, policy expectations

 

Risk assets rebounded and the yen resumed its fall on Wednesday as a sharp sell-off over the past two sessions lured bargain hunters, whose appetites were boosted by firm American corporate earnings and by data pointing to ongoing U.S. monetary stimulus.

 

European stock markets were seen modestly higher, with financial spreadbetters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX to open up as much as 0.2 %. U.S. stock futures were down 0.2 %, however, suggesting a soft start at Wall Street.

 

While markets regained some stability after investors likely liquidated part of their excessively built-up positions in the previous session's sell-off, wariness remained.

 

"We're now going through an uncertain period for risk assets, really," said Stan Shamu, market strategist at IG Markets. "The market is becoming a bit choppy and just range-bound as investors become a bit uncertain which way the market wants to swing this time around."

 

The MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 %, rebounding from Tuesday's session when it fell as much as 1 % and was close to its 2013 low.

 

The recovery in commodities soothed investor sentiment in resources-rich Australia, pushing its shares up 1 %.

 

Shanghai shares bucked the trend and fell 0.7 %, while South Korean shares were flat on earnings concerns after Samsung Engineering reported first-quarter losses on Tuesday, highlighting the vulnerability of firms with overseas exposure.

 

The International Monetary Fund on Tuesday trimmed projections for global economic growth for this year and next to take into account government spending cuts in the United States and the latest struggles of recession-stricken Europe.

 

GAINS BY GOLD

 

Gold, which earlier led the liquidation of assets across the board after weaker-than-expected Chinese and U.S. economic reports stoked growth concerns, rose 1 % to a session high of $1,381.80. But it remain volatile, last trading at $1,373.85, up 0.4 %, as reduced prices drew buyers of gold bars, coins and nuggets.

 

Crude oil futures also firmed, with U.S. crude steadying at $88.74 a barrel, crawling up from a four-month low of $86.06 hit on Tuesday. Brent rose 0.4 % to $100.33 a barrel, after breaching below $100 for the first time in nine months on Tuesday.

 

Japan's Nikkei average climbed 1.2 % as the yen weakened. The Nikkei tumbled as much as 2 % on Tuesday when the yen's rebound took a toll on sentiment.

 

"After seeing a pull-back, there is an opportunity for buying on the dips," Yutaka Miura, a senior technical analyst at Mizuho Securities, said of Japanese shares.

 

European shares fell on Tuesday on weak ZEW German consumer confidence numbers and heightened concerns about the earnings outlook for European companies. But U.S. stocks gained more than 1 % after strong earnings from some of America's biggest companies such as Coca-Cola and Johnson & Johnson

 

U.S. consumer prices fell in March for the first time in four months and factory output slipped, reinforcing the view that the Federal Reserve will maintain its ultra-easy monetary policy stance to support economic growth.

 

"We still believe that the recent volatility in the commodity prices was mainly driven by long position liquidation, while the underlying backdrop remains risk-positive due to expanding global monetary easing," said Vassili Serebriakov, strategist at BNP Paribas.

 

U.S. gold futures hit a session low of $1,365 and last traded at $1,380.2, after plunging to $1,321.50 on Tuesday, their lowest level since September 2010. Spot gold shed as much as 2.3 % to $1,321.35, the lowest level in more than two years, on Tuesday.

 

Holdings at SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.73 % to 1145.92 tonnes on Tuesday, while holdings of global gold ETFs were at their lowest in more than a year.

 

The dollar gained 0.9 % to 98.42 yen after touching a low of 95.67 yen on Tuesday, while the euro rose 0.6 % to 129.64 yen, well above Tuesday's low of 125 yen.

 

"In contrast to prior growth scares, stocks in the sweet spot of monetary policy - high quality, high dividend yield, low volatility - are supporting the broader market," said Barclays Capital in a research note. "The question remains if the market can hold up in the face of a soft global growth outlook."