Asian stocks climbed on Thursday as investors breathed a sigh of relief after Greece moved a step closer to avoiding a default by adopting harsh austerity measures, a move that boosted the euro and sparked a broad rebound in risky assets.
European shares were set for gains, with futures on the Dow Jones Eurostoxx 50 STXEc1 up 0.5 per cent.
As the first half of the year drew to a close, Greece’s latest efforts to cut back on debt stirred hopes that it would remove some of the uncertainty hanging over markets.
Worries that the U.S. and Chinese economies are quickly slowing, on top of the fears that Greece might be headed for a messy debt restructuring, had prompted a broad pull-back in equities and commodities while boosting safe-haven bonds.
Analysts at Goldman Sachs recommended that clients start adding to risk in their portfolios with the Greek crisis dissipating for now, arguing that the economic headwinds from high oil prices and Japanese supply chain disruptions were fading.
“Most investors are cautious, if not outright negative, and light on risk,” said Goldman strategists in a note to clients. “We have started to add pro-cyclical positions for the first time in two months. Data might disappoint a little further in the near term, but we think the risk-reward is becoming more asymmetric.”
The euro pushed higher for a fourth straight day after the Greek parliament passed the measure by a margin of 155 to 138, raising hopes that a second vote on implementing the laws would also make it through amid violent protests in Athens.
The MSCI index of Asia-Pacific shares outside Japan was up 1.6 per cent and set to finish the first half of the year just barely in positive territory — showing the resilience of equities to all the worries plaguing investors.
Among the regional sectors, consumer discretionary shares were the best performer so far this year, rising 10 per cent on the back of sharp gains in South Korean automakers Hyundai Motor and Kia Motors as the two grab market share in the United States from Japanese rivals.
Tech shares have fared the worst, losing 6.5 per cent as Asia’s big computer and chipmakers struggle with softening sales.
Stocks also gained as market players covered short positions that had been built up heading into the Greek parliamentary votes. Short positions on Hong Kong’s Hang Seng index reached their highest levels since the financial crisis in 2008 this week.
Japan’s broad TOPIX index was up 0.6 per cent but down 5.5 per cent on the year following the supply chain disruptions from the massive March 11 quake and on worries about power outages in the hotter summer weeks ahead.
Gold slipped to $1,513.05 an ounce , while U.S. crude oil prices CLc1 rose 31 cents at $95.08 a barrel.
As the first half of 2011 winds down, equities, commodities and bonds were set for slight gains — giving some indication that the Federal Reserve’s $600 billion bond buying programme has given a broad lift to asset prices.
The MSCI World index is up 2.6 per cent, while the Reuters/Jefferies CRB index of commodities is up 1.8 per cent and major bond market indices were in positive territory. The Bank of America-Merrill Lynch U.S. Treasury Master index has posted a year-to-date return of 2.5 per cent.
An Eventful 2011
The latest chapter in the euro zone crisis is one of several events this year — worries about inflation in Asia, the Arab Spring revolutions, surging oil prices, Japan’s nuclear scare, the coming end of QE2 — that have roiled markets.
Investors were squaring up positions before closing their books while looking to see if the uncertainty around the global economy clears in coming months.
The euro rose 0.4 per cent from late U.S. trade to $1.4495 and popped above $1.45 , while the dollar dipped 0.4 per cent to 80.40 yen .
The high-yielding Australian dollar, which is traded as a proxy on Chinese and global growth, jumped 0.6 per cent to $1.0730 <AUD=D4, staging a sharp recovery from a two-month low touched on Monday.
The dollar had surged across the board as market players sought safer havens heading into the Greek parliamentary votes this week, but as the support for austerity became clear some of those funds have headed back into risky assets.
Safe-haven government bonds have also retreated.
Benchmark 10-year Japanese bond yields edged up 1.5 basis points to 1.130 per cent, up from a seven-month low hit earlier this week and are up just slightly from the start of the year. U.S. Treasuries steadied after a three-day selloff.
In a Reuters poll, Japanese fund managers cut their global stock weighting and boosted their Japan bond weighting to a record high 38.8 per cent in June, showing how many investors are being extra cautious about taking risk.
The fact that caution was running so high suggested that markets might be near a turning point that would be positive for stocks and risky assets since investors may find themselves missing out on any further rally.