Tokyo led gains across Asian markets for a second straight day Tuesday, tracking a record on Wall Street as the North Korea crisis ebbs and dealers breathed a sigh of relief that Hurricane Irma caused less damage to Florida than feared.
The UN Security Council voted unanimously Monday to step up sanctions against North Korea, having won the crucial support of Russia and China, while the US held out hope for a peaceful resolution to the crisis.
The move provided a much-needed boost after last weekend’s nuclear test by Pyongyang, which hammered markets last week and sent investors fleeing for the safe havens of the yen and gold.
Monday’s agreement followed the North’s decision not to fire another missile for its foundation day celebrations Saturday, which helped lift all three main New York indexes more than one percent higher, with the S&P 500 at a new record.
“What road seems to be travelled now is one of negotiation rather than provocation. There has been a reversal of the tactics over the last week and I think that’s what the markets are seeing,” Jefferies chief global strategist Sean Darby said.
Most of Asia followed suit, with a sharply weaker yen a plus for Japan’s exporters. The dollar was close to the 109.50 yen mark, compared with the 10-month lows around 107.30 yen last week.
The Nikkei ended the morning session one percent higher, Shanghai added 0.1 percent and Sydney was 0.7 percent up. Seoul gained 0.2 percent while Taipei and Singapore were also higher.
But Hong Kong retreated 0.1 percent following a strong gain over the previous two sessions, while Wellington was also down.
– Euro rally fades –
Analysts said that while Irma was still deadly, the fact it struck the western coast of Florida, instead of cutting a path through the spine of the state as first feared, was welcomed, meaning the recovery would be billions of dollars less.
That provided extra support to the dollar, which also made some inroads against the euro as speculation swirled that some members of the European Central Bank favour a slow wind-down of its stimulus programme. The single currency was back below $1.20, having broken the marker last week for the first time since the start of January 2015.
Eyes will now turn to the release of US inflation figures later in the week, which could provide some clues as to the Federal Reserve’s plans for hiking interest rates again this year. A weak run of data in recent months have led dealers to lower their expectations for any more tightening.
Greg McKenna, chief market strategist at AxiTrader, said there were hopes on trading floors that President Donald Trump’s decision to work with Democrats to lift the debt ceiling this month could provide hope for his economic agenda.
“The new paradigm in Washington which might be emerging between President Trump and the Democrats might have rekindled hopes that the Trump agenda for the economy isn’t dead,” he added.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 1.0 percent at 19,741.42 (break)
Hong Kong – Hang Seng: DOWN 0.1 percent at 27,919.27
Shanghai – Composite: UP 0.1 percent at 3,379.95
Euro/dollar: DOWN at $1.1951 from $1.1200 at 2050 GMT
Dollar/yen: DOWN at 109.43 yen from 109.47 yen
Pound/dollar: DOWN at $1.3166 from $1.3168
Oil – West Texas Intermediate: DOWN three cents at $48.04 per barrel
Oil – Brent North Sea: DOWN seven cents at $53.77 per barrel
New York – DOW: UP 1.2 percent at 22,057.37 (close)
London – FTSE 100: UP 0.5 percent at 7,413.59 (close)