Asia-Pacific Stocks Rally on US Data, Europe Flat Ahead of Draghi Speech

MOSCOW, December 4 (Sputnik) — Asian markets rallied today on the optimistic US data, while European stocks went flat on the anticipation of the speech of the European Central Bank’s (ECB) head Mario Draghi, who might announce a wider economic stimulus today.

Japan’s Nikkei index rose 0.8%, almost touching its seven-and-a-half years high as public polling suggests an upcoming decisive electoral victory of the acting PM Shinzo Abe-led coalition, meaning the current economic policy enjoys widespread support from the people and businesses alike. The so-called ‘Abenomics’, is based on looser monetary conditions and further pro-inflation efforts, is contributing to bullish sentiment of the investors.

"There's activity in anticipation of extremely promising conditions being born," said Hiroyuki Nakai of the Tokyo-based Tokai Tokyo Research Center, as quoted by Reuters.

Outside Japan, the MSCI Index of major Asia-Pacific equities (sans Japan) climbed 0.4%, while Australia’s markets recovered somewhat from yesterday’s losses as S&P/ASX 200 added 0.88%. Mainland China’s Shanghai Composites rose 2.3% on the vivid anticipation of Beijing’s stimulus action. However, the Communist authorities are taking their time, as there are concerns that looser monetary conditions may prompt a collapse in the nation’s overheated real estate sector.

The United States released statistics on private sector employment and services sector yesterday, suggesting a solid recovery.

"With all of the talk about a recession in Japan, possible recession in the euro zone and in Russia, the U.S. economy is looking much more attractive," Jennifer Lee of the New York-based BMO Capital Markets told Reuters.

The US private sector added 208,000 jobs in November after a rise of 233,000 payrolls the previous month, supporting the trend of the last seven months with private sector adding more than 200,000 jobs per, according to the ADP Research Institute report. However, the official government assessments will arrive Friday. But it is very unlikely the governmental estimates would contradict these data as Purchasing Managers’ Index in the US services increased to 59.3 in November from 57.1 the previous month. PMI above 50 indicates growth, while below that is contraction. The US figure should be compared with the approximate figures of 51.1 in the Eurozone, 53 in China and 44.5 in Russia.

The Eurozone is in a gloomy sentiment as its growth is sluggish. However, stock markets today edged up slightly on the expectations that ECB head Mario Draghi will introduce a full-scale American-style bond-buying programme. While some investors are worried with the inevitable depreciation in assets, everybody is well aware a wider stimulus will spur growth, ultimately benefitting all players.

European shares edged to their seven-year high with the Stoxx Europe 600 index adding 0.2%, the British FTSE 100 up 0.03%, the German DAX  up 0.47%, the French CAC 40 0.35% higher, with biggest gains in airlines equities.

“The assumption these days is that constantly disappointing macro data in the euro-area makes the probability of Draghi doing something more likely,” Henrik Drusebjerg of Carnegie Investment Bank AB in Copenhagen told Bloomberg. “My guess is that markets have maybe over interpreted that and expect more than they will get today.”

The wider stimulus, if agreed upon in the ECB, will not start immediately. However, the regulator has been buying selective private bonds for some time, and the scope of these repurchases might be widened as soon as more stimulus in announced. Nevertheless, the Eurozone should not expect any sudden major policy shifts.