Asian markets surge after intraday reversal

Euro gains, Dow futures jump as risk appetite comes back in vogue

Asian markets eked out impressive gains after starting in a pessimistic manner in the second session of the week. The DOW futures launched a stupendous comeback and a generous rise in risk appetite lifted hard assets like crude oil and copper, pushing up resources. The markets seemed to have moved ahead of the Eurozone debt issues the liquidity scenario in the European banking system looked alright, as reflected in the stress test on the European banks last week. This fueled risk appetite and supported the Euro to rise towards 1.2600 against the dollar, bringing the six-week high levels yet again in contention for the pair.



Japanese stocks added handsome gains, reversing from a seven month low as bargain hunting in technology and real estate shares, supported the sentiments. The market had earlier tumbled as the Japanese Yen rose sharply and hurt the exporters. However, the losses were cut as risk appetite made a hard comeback. The Nikkei 225 Stock Average jumped 71.26 points, or 0.8%, to close at 9338.04. The Topix index of all the Tokyo Stock Exchange First Section issues also moved higher by10.35 points, or 1.2%, to 847.24.

Shaping up a lackluster start to the Asian markets was a statement from the Reserve Bank of Australia's sounding upbeat on the prospects for the Australian economy. Leaving interest rates unchanged after a series of hikes, the central bank said Australia's economic growth was on track and China's expansion was "starting to moderate to a more sustainable rate." This boosted hopes of a sustained recovery in the Australian economy and the benchmark S&P/ASX 200 index added 1.3% to 4,276.10.

Chinese stocks started the day in a nervous fashion on lack of cues from the overnight trades, as the US markets remained shut on Independence Day. However, the benchmark Shanghai Composite Index climbing off a 15-month low and gained were exacerbated after China's passenger-car sales growth slowed in June as inflation accelerated, reducing consumers' spending power in the world's largest auto market. This was taken as a sign by the investors that the policymakers' attempts of stabilizing an overheating economy are paying off and the economic is going through a much-needed moderation.

The Shanghai Composite moved up above 2400 points mark and added 45.48 points, or 1.9 % on a closing basis to settle at 2,409.42. Sales of cars, sport-utility vehicles and multipurpose vehicles rose 10.9 % from a year earlier to 839,228 last month, the China Automotive Technology & Research Center said today. That compares with 34 % growth in April and 25 % in May, according to the center.

In Mumbai, stocks rallied across the board as global markets soared and a late rake hike from the Reserve Bank Of India did not deter the sentiments much. The key benchmark indices jumped to fresh intraday highs in mid-afternoon trade, tracking firm global stocks. Revival of monsoon rains in the past few days after weak rains last month, also underpinned sentiment. The market breadth was strong, with all the sectoral indices trading in positive territory. The BSE 30-share Sensex was up 167.07 points or around 1%, to 17608.10. Metal, IT and realty stocks led the rally.

The Reserve Bank of India (RBI) on Friday, 2 July 2010, hiked the repo rate by 25 basis points to 5.5% from 5.25%, with immediate effect. It also hiked the reverse repo rate, at which it absorbs excess cash from the banking system, by an equal 25 basis points to 4% from 3.75%. The central bank said the latest rate hike is a part of the calibrated exit from the expansionary monetary policy.

The above monetary measures should contain inflation and anchor inflationary expectations going forward, while not hurting the recovery process, the central bank said in a statement. This mid-cycle policy action has been warranted by the evolving macroeconomic situation, it said.

In other markets, Hong Kong's Hang Seng added 1.2%, South Korea's Kospi advanced 0.60%, Singapore's Strait Times closed up 0.84% while Taiwan's TSEC moved up a massive 1.46% on the day.

Commodities gained impressively today with crude oil bouncing back from levels near $71 per barrel on a recovery in Euro. The August futures for Light, sweet crude oil were quoting at $72.86, up 72 cents from the previous close. The Copper futures were up nearly 2% at $2.9670 per pound while Gold also managed to gain after the recent losses. COMEX Gold futures were up $3.90 per ounce at $1211.60 per ounce for the August delivery.