Encouraged by prospect of extended stimulus in US and economic reform in China

Asian share markets crept cautiously higher on Monday, encouraged both by the prospect of extended stimulus in the United States and real economic reform in China.

A weaker yen helped Tokyo’s Nikkei add another 0.2% to reach a six-month peak. The index amassed its biggest weekly rise in four years last week.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.5%, having gained 1.3% on Friday for its best daily rise in almost two months.

Singapore shares gained 0.3% as data showed exports beat forecasts in October.

It is another important week for US monetary policy as Federal Reserve Chairman Ben Bernanke speaks on “Communication and Monetary Policy” on Tuesday.

The day after the central bank releases minutes from its October policy meeting, which will get trawled for hints on when it might start winding back its asset buying program.

Last week, presumptive Fed chief Janet Yellen sounded in no rush to taper, reinforcing market speculation that any move was more likely in March than December.

“If Fed officials think a December tapering is a realistic possibility, some hints to that effect would presumably make their way into the minutes this week,” said Michelle Girard, chief US economist at RBS.

“Just making clear that policymakers were open to taking action in December if the economic data showed the impact of the government shutdown was limited would likely suffice to shift expectations.”

Girard still believes March is the more likely window for a move, if only because bond markets are typically very thin in December so a taper then could risk major dislocation.

Figures on consumer prices and retail sales are also due on Wednesday and are expected to show that both price pressures and spending were subdued in September.

Speculation over the timing of stimulus tapering has buffeted markets since May when Bernanke first suggested a rollback of the bond-buying programme was not far off.

Source: Business Standard

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