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Nikkei leads gains in Asia markets as yen retreats

Asia markets closed higher on Thursday, with the Japanese benchmark index leading gains across the region on the back of a weaker yen.

Japan's Nikkei 225 gained 529.83 points, or 3.23 percent, to 16,911.05, extending advances on the back of the yen's recent, relative weakness against the dollar. In recent sessions, the index had come under pressure, when the yen broke under the 108 handle to the dollar.

Australia's ASX 200 closed up 63.94 points, or 1.27 percent, at 5,118.60, boosted by a 1.51 percent advance in the heavily-weighted financials sub-index. The country's so-called Big Four banks - ANZ, Commonwealth Bank of Australia, Westpac and NAB - added between 1.33 and 2.64 percent.

South Korea's Kospi returned to trade after being closed on Wednesday, rising 34.61 points, or 1.75 percent, to 2,015.93. In Hong Kong, the Hang Seng index gained 0.76 percent as of 2:27 p.m. HK/SIN time.

Chinese markets ended higher after wavering during the session. The Shanghai composite added 0.52 percent, or 15.90 points, to 3082.54, while the Shenzhen composite tacked on 1.02 percent, or 20.02 points, to 1982.45..

Overnight, U.S. equities closed higher, helped by gains in financial stocks. "Risky assets have continued to benefit from an improvement in sentiment," said Rodrigo Catril, a currency strategist at the National Australia Bank, in a morning note.

"Bank stocks have led the surge in equity markets [overnight] and most commodities have also enjoyed some gains, despite of a pullback in oil prices. The dollar is broadly stronger with safe haven currencies the underperformers," Catril said.

Symbol
Name
Price
 
Change
%Change
NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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The recent advances in global equities has created an air of disbelief from all parts of the market, according to Chris Weston, chief market strategist at IG.

In an afternoon note, Weston said major indexes such as the Dow and the S&P 500 are nearing their all-time high, which has left many market watchers doubtful. "It just doesn't feel right, but I was always taught that an asset at all-time highs, or even 52-week highs, is outright bullish and should be traded as such - but no one believes we are here," said Weston.

He added, "many in the market are clinging to the first-quarter macro concerns (China yuan devaluation, low oil, low growth/recession, negative interest rate policy concerns and deflation fears) that they have missed the move higher."

In Singapore, the Straits Times index added 0.94 percent, following the release of its economic growth numbers for the January-March period. The city-state's gross domestic product (GDP) expanded 1.8 percent on-year during the January-March period, slightly above the 1.7 percent forecast in a Reuters poll. On an on-quarter basis, GDP was flat, as expected.

At the same time, the Monetary Authority of Singapore (MAS) surprised markets by easing its currency policy. The central bank, which uses exchange rates to guide policy instead of interest rates, set the rate of appreciation of the Singapore dollar's trading band based on a basket of currencies, called the Singapore dollar nominal effective exchange rate (S$NEER), at zero percent.


The Singapore dollar weakened sharply after the release, with the dollar fetching 1.3660 Singapore dollars as of 1:47 p.m. HK/SIN time, compared with around 1.350 Singapore dollars before the release.

"The MAS monetary policy statement was dovish across the board," analysts at ANZ said in a note after the decision. "There was a clear downgrade in MAS's growth and inflation assessment without them downgrading their actual forecasts."

ANZ noted that the MAS is expecting GDP growth of 1-3 percent this year, but is now likely looking at the lower end of that range. That means the MAS might not be done easing policy, ANZ said.

In the currency market, the Japanese yen retreated to the 109 handle against the dollar, on the back of fresh dollar strength. The dollar/yen pair traded at 109.41 as of 1:53 p.m. HK/SIN time, compared with levels under 109 during the Asia session Wednesday.

Japanese exporters closed mostly higher, with shares of automakers Toyota, Nissan and Honda advancing between 1.93 and 3.25 percent. Shares of Sony, reversed losses to trade up 0.40 percent. A weaker yen is considered a positive for exporters as it makes their products more competitive overseas and increases the value of repatriated profits.

A businessman walks past an electric quotation board flashing the Nikkei key index of the Tokyo Stock Exchange (TSE) in front of a securities company in Tokyo on April 13, 2016.
Toru Yamanaka | AFP | Getty Images
A businessman walks past an electric quotation board flashing the Nikkei key index of the Tokyo Stock Exchange (TSE) in front of a securities company in Tokyo on April 13, 2016.

The Australian dollar traded at $0.7656 Thursday afternoon at 2:12 p.m. HK/SIN time, after trading in a narrow range overnight, according to Catril.

Earlier in the session, data from the Australian Bureau of Statistics showed the unemployment rate in the country fell slightly to 5.7 percent, lower than a market forecast of 5.9 percent, according to Reuters. The number of new jobs added to the economy was 26,100, beating a forecast for 20,000.

Shane Oliver, head of investment strategy and chief economist at AMP Capital, said in a note that though the March jobs report was not "unambiguously strong" as full-time employment fell somewhat, but the continuing downtrend in the unemployment rate suggests "it is now hard to see the Reserve Bank of Australia cutting interest rates at its May meeting."

Elsewhere, some analysts questioned the dollar's strength against all major currencies overnight, which followed weak U.S. retail sales numbers. The dollar index, which measures the dollar against a basket of currencies, traded up 0.26 percent at 94.98 in the afternoon Asia time. In recent sessions, the index had slipped as low as to the 93 handle before trading higher.

Kathy Lien, managing director of foreign exchange strategy for BK Asset Management, wrote in a note that the dollar's strength "in the face of exceptionally weak retail sales numbers has many investors wondering if the currency has bottomed."

"When the dollar moves higher despite such an abysmal report, market participants start to wonder if the softness of the U.S. economy has been completely priced in and that the dollar's downtrend is finally over," Lien said.

Oil prices retreated during Asian hours, with global benchmark Brent down 1.43 percent to $43.55 a barrel as of 2:19 p.m. HK/SIN time, while U.S. crude slipped 1.56 percent to $41.11.

Energy plays were mixed, with Santos advancing 1.22 percent and Inpex higher by 2.65 percent, while mainland shares of Sinopec were off 2.65 percent.

Overnight, oil prices fell after Reuters reported Russian oil minister Alexander Novak told a closed-door briefing that a deal on an oil output freeze scheduled to be signed later this month in Doha will be loosely framed with few detailed commitments.

Oil prices have rallied recently amid hopes for an output deal, but some doubts have crept in.

"We believe any potential agreement to freeze production would be largely symbolic," Nomura said in a note Thursday. "Meanwhile, we see minimal likelihood of OPEC cutting total output from current high levels."

Major U.S. indexes closed up overnight, with the Dow Jones industrial average adding 1.06 percent, the S&P 500 up 1 percent and the Nasdaq composite rising by 1.55 percent.

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