New highs for stocks and oil

New highs for stocks and oil
Monday October 29, 12:00 am ET
By Ian Chua


HONG KONG (Reuters) - Asian stocks hit a record high on Monday and the dollar plumbed an all-time low versus the euro and a basket of major currencies as investors bet the U.S. Federal Reserve will cut interest rates this week.
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A wilting dollar coupled with a brief halt to one-fifth of Mexico's production fired up oil prices, sending U.S. crude above $93 a barrel for the first time. Gold rode on the coat-tails of oil to a 28-year high of $792.60 an ounce and other base metals such as copper also firmed on the weak dollar.

Further lifted by upbeat earnings from firms such as Nissan Motor (Tokyo:7201.T - News), Japan's Nikkei average (Osaka:^N225 - News) climbed 1.6 percent to a one-week high by 0337 GMT, while MSCI's measure of other Asia Pacific stocks advanced 1.9 percent.

The MSCI index hit an all-time high of 585.32, surpassing the previous peak of 574.04 set on Friday and has gained more than 45 percent this year -- triple the gains for MSCI's main world equity index (^MIWD00000PUS - News).

"A (U.S.) rate cut is already factored in and this is helping to boost the Nikkei," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

Lower U.S. interest rates should boost economic growth in Asia's main export market, and also make equity valuations more attractive.

Among major markets in the region, Hong Kong's Hang Seng Index (HKSE:^HSI - News) and South Korea's KOSPI (KSE:^KS11 - News) both reached new life highs, while Australia's S&P/ASX 200 index (ASX:^AXJO - News) was a whisker away from its record high set on October 15.

After two straight weeks of losses, Chinese mainland stocks rebounded, pushing the Shanghai Composite Index (^SSEC - News) over 2 percent higher.

BANKS RISE

Markets were led by financial names as investors expected that further rate cuts by the Fed, whose two-day policy-setting meeting kicks off on Tuesday, will help loosen up credit markets that had been kicked hard by the U.S. subprime market woes.

Persistent weakness in the U.S. housing market is expected to spur the Fed to lower rates again after the aggressive 50 basis point cut last month that gave global stocks a boost.

Japan's top lender, Mitsubishi UFJ (Tokyo:8306.T - News), jumped 5.5 percent and South Korea's Kookmin Bank (060000.KS), due to deliver its quarterly results later in the day, gained 4 percent.

Investors also snapped up Nissan Motor, sending the stock up 13 percent, after the automaker posted a surprise gain of 12 percent in quarterly operating profit on Friday, while Australian nickel miner Jubilee Mines (ASX:JBM.AX - News) surged 40 percent on the back of a $2.8 billion takeover offer from Anglo-Swiss miner Xtrata (LSE:XTA.L - News).

But Advantest Corp (Tokyo:6857.T - News) skidded 5.2 percent after the world's largest maker of microchip testers posted a drop in first-half net profit and cut its guidance for this year to below expectations.

DOLLAR WILTS

Amid expectations of lower U.S. rates, the dollar plumbed new depths against the euro. The dollar index (^DXY - News), which measures the greenback's value against a basket of six major currencies, eased 0.2 percent, after earlier touching an all-time low of 76.890.

The euro rose to a high near $1.4415 and also climbed against the Japanese currency to 164.50 yen. The dollar bought 114.14 yen, little changed from late New York levels on Friday.

The low-yielding yen tends to underperform when stock markets rally as it is usually used to fund the purchases of higher-yielding, more risky assets in the popular carry trades.

A barrage of U.S. data this week, including the advanced reading of third-quarter economic growth report, will help determine the fate of the dollar, especially if they turn out surprisingly positive for the U.S. economy.

"All of the dollar negatives are priced in, so we need data and some new factors," said Luke Waddington, head of forex trading at Royal Bank of Scotland in Tokyo.

Safe-haven government bonds struggled as demand for riskier assets grew, causing bond yields to rise.

The benchmark 10-year Japanese government bonds climbed one basis point to a one-week high of 1.625 percent.

The Bank of Japan will also meet this week to discuss monetary policy, but was seen holding the overnight call rate target steady at 0.5 percent.


Source = http://biz.yahoo.com/rb/071029/markets_stocks.html?.v=1