TOKYO (Reuters) – Asian stocks rose on Tuesday, supported by a bounce in Chinese shares amid hopes for government stimulus, while sterling braced for the vote in parliament over the British government’s plan to exit the European Union.
FILE PHOTO: A man looks at an electronic board showing the Nikkei stock index outside a brokerage in Tokyo, Japan, January 7, 2019. REUTERS/Kim Kyung-Hoon
The odds look stacked against Prime Minister Theresa May winning approval for her deal. Voting is expected to start about 1900 GMT Tuesday.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS recovered from early losses and advanced 1.3 percent. South Korea’s Kospi .KS11 hit a one-month high and Japan’s Nikkei .N225 added 1 percent.
In China, the CSI300 index of Shanghai and Shenzhen shares .CSI300 was up 1.7 percent amid expectations of more government policy measures to prop-up a slowing economy.
China’s state planner said on Tuesday it will aim to achieve “a good start” in the first quarter for the economy in a signal of more growth-boosting steps.
State television also quoted Chinese Premier Li Keqiang as saying the government is seeking to establish conditions helpful to meeting this year’s economic goals.
That came after data on Monday showed China’s exports unexpectedly fell the most in two years in December, while imports also contracted sharply.
Cyclical shares led the gains in Asia-Pacific, with Australian financial shares .AXFJ at their highest since early December while Japanese electronics .IELEC.T and machinery makers shares .IMCHN.T rose to their best levels in six weeks.
“It is interesting that cyclicals are leading the gains today. It appears some contrarian investors are starting to buy cyclicals, looking beyond the last economic slowdown,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.
“But I would suspect there will be heavy selling if we go up further, to around 2,650 in the S&P500 and 21,500 in the Nikkei,” Kuramochi added.
S&P500 e-mini futures ESc1 gained 0.6 percent in Asian trade.
In Monday’s session on Wall Street, the S&P 500 .SPX lost 0.53 percent, with the biggest drag coming from a 0.9 percent fall in technology sector .SPLRCT.
U.S. earnings season began on a positive note on Monday as Citigroup Inc (C.N) beat profit estimates. The bank’s shares rose 4.0 percent and bolstered the S&P financial sector .SPSY, which rose 0.7 percent.
The British pound GBP=D3 was expected to steal the limelight later in the day as the Britain’s parliament votes on the proposed Brexit deal.
On Monday, May urged lawmakers to take a “second look” at her deal, which lawmakers are expected to reject.
Such a result could produce a wide range of outcomes, from a disorderly exit from the union to a reversal of Brexit.
“Markets have priced in a rejection of May’s plan and there are many scenarios after that. Still I’d think the most likely outcome is to extend the (March 29) deadline of Brexit,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
Indeed, currency option markets are barely pricing in the chances of sharp moves in sterling.
The pound’s one-month implied volatility GBP1MO= stood at 12.625 percent, above the average for the past year of around 8.8 percent well off 20-percent plus levels seen in the days just before the UK referendum on June 23, 2016.
The pound changed hands at $1.2909, up 0.3 percent, having hit a two-month high of $1.2930 on Monday after a report, subsequently denied, that a pro-Brexit faction of lawmakers could support May’s deal.
The euro inched up 0.1 percent to $1.1480 EUR=, consolidating after hitting a 12-week high of $1.1570 touched on Thursday.
The dollar gained 0.5 percent on the yen to 108.685 JPY=.
Oil prices also rebounded on supply cuts by producer club OPEC and Russia. <O/R>
International Brent crude oil futures LCOc1 were at $59.80 per barrel, or 1.37 percent from their last close.
U.S. crude futures CLc1 stood at $51.22 per barrel, up 1.41 percent.
Additional reporting by Shinichi Saoshiro; Editing by Shri Navaratnam and Richard Borsuk