Asian markets see afternoon rebound after ECB move

Asian markets see afternoon rebound after ECB move

Asian markets ended the week on a high Friday, with an afternoon rally erasing morning losses as investors changed tack on their view of comments from the European Central Bank head hinting its latest rate cut could be its last.

Regional markets sank into the red soon after opening as ECB boss Mario Draghi's statement was seen an indication of the limitations on finance chiefs to drag the global economy out of its long-running torpor.

The bank on Thursday announced a cut in its deposit rate further into negative territory as part of a series of stimulus that also included a ramping up of its huge bond-buying quantitative easing scheme - measures that surpassed expectations.

The news sent European stocks soaring and the euro tumbling as traders gave a loud cheer, with analysts saying it beat expectations.

But within two hours Draghi told a news conference he did not anticipate making any further cuts, sparking a wave of selling that spread into Asia on fears the bank was running out of options.

Observers said central banks around the world are gradually running out of weapons to kick-start their respective economies after a series of measures.

However, investors across Asia turned bullish towards the end of the day as they reassessed their initial reaction to Draghi.

Tokyo ended up 0.5 per cent, Hong Kong added 0.9 per cent in the afternoon and Shanghai put on 0.2 per cent. Sydney gained 0.3 per cent and Seoul was 0.1 per cent up while Singapore, Wellington, Manila and Taipei were also comfortably higher.

Kay Van-Petersen, a strategist at Saxo Capital Markets in Singapore, told Bloomberg News the Draghi statement was "taken out of context".

"It said we don't anticipate that it'll be necessary to reduce rates further, but nothing could be further from the truth. It's (quantitative easing) for life for the next four to five years in the eurozone".

However, while stocks reversed, the euro held on to most of its gains, sitting at $1.1173. It had fallen to as low as $1.0822 after the stimulus Thursday and then bounced above $1.12 on Draghi's comments.

Attention will now turn to policy meetings for the Federal Reserve next week, with hopes for some forward guidance on US interest rate policy, as well as the Bank of Japan.

Oil prices resumed their uptrend after dipping slightly Thursday, with investors heartened by this week's data showing a sharp drop in gasoline reserves, suggesting demand is picking up.

US benchmark West Texas Intermediate was up 2.1 per cent and Brent gained 1.6 per cent.

More about

Purchase this article for republication.



Your daily good stuff - AsiaOne stories delivered straight to your inbox
By signing up, you agree to our Privacy policy and Terms and Conditions.