Asian share markets welcome ECB stimulus
The ‘Draghi’ effect propped up Asian share markets on Friday as investors demonstrated bullishness following the European Central Bank’s policy meeting in which it released details of its new bond-buying programme.
On Thursday, ECB boss Mario Draghi gave a start date to the bond-buying programme of 9 March and kept the end date open, lifting market sentiment that the central bank will support economic growth indefinitely.
For stock traders, that means continued liquidity and low rates in the global financial system, which is highly welcome as the Federal Reserve and Bank of England both look to bow out of the stimulus game in the coming quarters.
More importantly for Asian markets, China’s central bank last weekend cut interest rates and left the door open for more monetary easing which injected a fresh wave of enthusiasm in the region.
As such, Asian markets were on track to end the week on a bright note with the MSCI Asia Pacific Index up 0.5%.
The stand-out gainer however was Japan’s Nikkei 225 index which rose 1% to 18941 and near the 19000 mark – a level it has not seen since April 2000.
With the Japanese government still trying to grapple with creating inflation – a task that’s proved difficult over two decades – the Bank of Japan, like its peers, is in the game of pumping stimulus too, buying bonds on a monthly basis. Japan’s inflation rate of 2% is still not tested with consumer prices in the country up only 0.2% on the year in January.
Australia’s had a tough week with its central bank not giving into calls to cut rates further and staying pat on policies though that’s in question as the country’s economy needs stimulus support for growth to stabilise.
That was evident by the poor showing of GDP figures for the fourth quarter released this week. On Friday, the S&P/ASX 200 index ended the session on the flat line, weighed further by the drop in iron ore prices. Australia is heavily reliant on its materials sector, thus falling vulnerable to sharp declines in commodity prices.
On Friday, the Shanghai index in China declined by 0.2%. Elsewhere, the Hang Seng in Hong Kong was down by 0.1%. Traders weighed in on the recent cut to GDP forecasts by Chinese policy-makers to 7% from 7.4% previously and the cut to the consumer price inflation target to around 3% from 3.5% last year, indicating that lawmakers in the country have acknowledged disinflationary pressure on the economy.
That’s raised pressure on the Chinese central bank to combat potential deflationary threats by injecting more stimulus measures. Chinese stocks booked profits heading into the weekend on hopes that policy-makers can achieve growth and defeat potential threats of deflation in the long-term.
Asian markets were also awaiting to the release of US non-farm payrolls data, due later in the European session. The US economy is expected to create 235,000 jobs last month, an 11th consecutive gain north of 200,000, though down from 257,000 in January and 329,000 in December.