Published On: Sun, Nov 4th, 2012

Asian stocks rise after positive news from US and China

The latest data from the two largest economies in the world showed signs that the economy is recovering. A survey of consumer confidence in the United States reported higher than expected numbers while China’s manufacturing sector seems to be gradually recovering from its temporary slowdown.

Positive reports from the United States and China fed into a growth in Asian stock markets. The Nikkei 225 in Japan gained 1.1 percent to reach 9.048.23 while the Hang Seng in Hong Kong gained 1.3 percent to reach a level of 22,099.82. In Australia, the S&P/ASX200 rose slightly by 0.2 percent to end at 4,465.80. The South Korean Kospi advanced one percent to 1,917.20. Benchmark indices grew in Taiwan as well as Singapore. Despite this growth in other markets, shares in mainland China dropped over the course of the day.

One gainer for the day was the Japanese company, Sony Corporation. As the maker of the PlayStation line of game machines and Bravia televisions, this company managed to report a lower loss for the for this quarter than it had at the same time last year. Sony has been attempting to restructure its company and boost sales around the world. For the day, Sony Corporation stock advanced by 2.8 percent.

Not all of Japan’s technological stocks fared as well. Another well-known electronics maker, Sharp Corporation, saw its shares fall by 4.7 percent. This drop was due primarily to the company running at a loss for the first half of the year.

In South Korea, LG Display Company watched its shares rise by 4.1 percent. Its rival, Samsung Electronics Company, boasted a 2.5 percent increase in share prices during the same day.

United States Markets Advance

After job figures came in at higher-than-expected rates, the Dow Jones Industrial Average and the New York Stock Exchange increased by over 100 points overnight. The United States Institute for Supply Management also released a report that showed that factories have posted growth for two consecutive months. American factories saw an increase in orders for the month of October and higher production numbers. Consumer confidence in the nation is presently at a five-year peak. Earnings reports from major American automakers and retail chains remained solid for the month.

Overall, the Dow Jones industrial average ended the day at 13,232.62 after gaining one percent. The Nasdaq composite index increased by 1.4 percent to end the day at 3.020.06. At the same time, the Standard & Poor’s 500 index advanced by 1.1 percent to reach a level of 1,427.59 by the end of the day.

During Thursday’s trading session, the euro dropped to $1.2936 from a previous level of $1.2939. The United States greenback managed to gain against the yen to 80.22 yen from its preceding close of 80.18. Benchmark oil intended for December delivery dropped by $0.28 to $86.81 per barrel due to electronic trading at the New York Mercantile Exchange. On Thursday, the same contract rose by $0.85 to end at $87.09.

Chinese Stocks Fare Poorly

Despite rising stock prices around the world, many Chinese stocks dropped during the trading session yesterday. Poly Real Estate Group Company was one of the better performers for the day. Following a report of sales growth by the China Business news, shares in Poly Real Estate Group Company increased by 0.2 percent. The report by China Business News states that the company had managed to increase its sales volume in 54 different Chinese cities in the last two months.

China Resources Sanjiu Medical & Pharmaceutical Company saw its shares drop by 2.8 percent for the day while BBMG Corporation shares fell by 2.6 percent. On the previous day, share prices in BBMG Corporation had increased by an astounding 10 percent. On the Shanghai Composite Index, seven stocks fell in value for every two stocks that gained. Overall, the Shanghai Composite Index fell by 0.3 percent to reach 2,098.88. Yesterday, the Shanghai gauge had managed to jump 1.7 percent due to the recently released purchasing managers index.  This report indicated that manufacturing grew in the nation for the first time in three months. By 11:30 AM local time in China, the CSI 300 Index had fallen by 0.5 percent.

The next few months will be unusual ones for China as the nation handles a once-in-a-decade change in leadership. On November 8, the ruling communist party will begin a congress. Most analysts believe that Vice President Xi Jinping will be the next head of the party and future president of China. Some also speculate that Vice Premier Li Keqiang will take Wen Jiabao’s place as premier. Like any election, the uncertainty that surrounds the leadership of the globe’s second-largest economy has the ability to spur share prices or drag down the stock market. Most analysts believe that China will be under increasing pressure until the end of the year. Until the year 2013 is underway, liquidity will be tight and industrial production will be entering its down season. In response, the People’s Bank of China is going to allow small and medium sized financial institutions to have a decrease reserve requirement ratio.

Greek Stocks Decline

Lawmakers in Greece are still embroiled in an argument over austerity measures. The owners of the bailout loan, the International Monetary Fund and the European Central Bank, have sought to finalize fiscal constraints in the last few weeks. After years of civil unrest caused by pension cuts and austerity programs, Greek politicians are understandably wary about entering into new agreements. With the continued debate over fiscal policies, Greek stocks are close to achieving their largest weekly drop for over four years. So far, the ASE Index has fallen by 13 percent for the week. The recent drop came as news of higher debt forecasts were released from Greece.

The prime minister of Greece, Antonis Samaras, released a bid this week that included a 13.5 billion euro austerity plan. Coalition partners believe that the package is not enough for the country to meet its bailout requirements and get back on its feet. Ten-year Greek bonds rose by 40 basis points after the news to reach 18.17 percent yesterday.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.