Asia Advances, Australian Dollar Hits 10-Month High

Asian stocks climbed to an 11-month high Tuesday on hopes a V-shaped recovery may be forming in the United States, while the Australian dollar hit its highest since late September after solid housing and retail sales data.

The batch of economic reports increased speculation the Reserve Bank of Australia at a policy meeting later in the day will indicate a shift away from its its rate cutting bias, and express more optimism on the economy, weighing on government bonds.

The Australian dollar was an early winner in the foreign exchange market. The currency rose to a high around $0.8470 after sequential growth in second quarter Australian retail sales and housing prices much exceeded
forecast. The Australian dollar also hit a 10-month high against the yen after data showed a stronger- than-expected rise in second-quarter chain volume retail sales, as investors awaited an interest rate decision by the Reserve Bank of Australia. The Australian dollar gained a boost after the data showed that chain volume retail sales rose by a better-than-expected 2.0 percent in the second quarter, offsetting the impact of a surprise monthly drop in retail sales in June. Oil prices rose more than 3 percent, edging above $71 dollars a barrel, on hopes the positive manufacturing data would feed through to higher demand.

Japan's Nikkei 225 Average closed 0.2 percent higher to hit a
ten-month closing high, buoyed by high tech exporters such as Advantest after U.S. data bolstered recovery hopes for the world's largest economy.

South Korea's KOSPI finished a touch higher, fueled by foreign buying and gains in auto issues on the back of solid U.S. sales, but falls by banks including Woori Finance Holdings weighed on markets.

Australian shares rose 1.1 percent, led by resource companies such as

Rio Tinto

that will benefit from an improved global economic outlook.

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Hong Kong shares gave up early gains, despite an above-expectations showing by HSBC in its first-half earnings as investors cashed in on the three-day rally in the market. HSBC jumped 6.6 percent after its first-half earnings came in well ahead of estimates from some top analysts, as a result of strong cost controls and lower credit charges. The Hang Seng ended 0.5 percent lower.

Singapore's Straits Times Index also finished down, losing 1.2 percent. Cosco lose early gains to end down 1.5 percent. The shipbuilder reported a 71 percent drop in net profit to $$37 million ($25.84 million) for the second quarter ended June 30. 

China's Shanghai Composite Index ended 0.26 percent up. Bank of China fell 1.9 percent, while Hua Xia Bank sagged 3 percent. Top lender ICBC dropped 3.2 percent in Hong Kong. China's big four state banks extended about 165 billion yuan ($24.16 billion) in new loans in July, marking a sharp fall from previous months, banking sources told Reuters.

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