Stocks start week steady after strong quarter, U.S. policies in focus

Asian shares started the week on a steady footing on Monday after a bumper quarter as investors look to the shape of U.S. trade and economic policies and how they could affect global growth.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was little changed in early trade while Japan's Nikkei .N225 rose 0.1 percent.

Ex-Japan Asia MSCI had gained 12.3 percent in the last quarter, its biggest quarterly gains in 6-1/2 years and almost double the 6.4 percent rise in MSCI's broadest gauge of the world's stock markets .MIWD00000PUS covering 46 markets.

Photo: Reuters
Photo: Reuters 

The rally was primarily underpinned by signs of a pickup in momentum in the global economy, led by China.

South Korea's trade data for March released over the weekend added to the evidence of an improving global demand outlook, with the country's exports rising more than expected.

While a private survey on China's manufacturing on Saturday came in below market expectations it still showed a healthy expansion after a similar survey by the government on Friday pointed to strong growth in the sector.

The main focus for markets this week centers on U.S. payrolls figures due on Friday.

"If we get strong reading in U.S payrolls data, the markets will try to price in a rate hike in June," said Minori Uchida, chief currency strategist at the Bank of Tokyo-Mitsubishi UFJ.

On the other hand, investors are on guard against the possibility the U.S. administration may adopt protectionist measures.

President Donald Trump sought to push his crusade for fair trade and more manufacturing jobs back to the top of his agenda on Friday by ordering a study into the causes of U.S. trade deficits and a clampdown on import duty evasion.

The executive orders came a week after Trump's promise to replace Obamacare imploded in Congress and a week before he meets with Chinese President Xi Jinping in Florida, a summit that promises to be fraught with trade tensions.

"After his failure to push through his healthcare reforms, investors increasingly think that his tax reforms will take time. And given the China-U.S. summit, trade issues could come to the fore this week," said Masahiro Ichikawa, senior strategist at Mitsui Sumitomo Asset Management.

Any hints that Washington may name some of its trade partners such as China, Japan and Germany, as currency manipulator could dent the dollar.

"The Trump administration is not necessarily seeking to reduce trade deficit through a cheaper dollar. But it has strong intentions to do that and it could use a weaker dollar as a bargaining tool in trade negotiation," said Uchida of the Bank of Tokyo-Mitsubishi UFJ.

In early trade, the dollar slipped 0.2 percent to 111.20 yen JPY=. Uchida said it could fall below its four-month low of 110.10 yen touched last Monday.

The euro EUR= ticked up 0.2 percent to $1.0673, rebounding from Friday's two-week low of $1.0651 hit after data had shown inflation in the currency bloc had slowed by far more than expected in March.

Oil prices stood near three-week highs on a growing sense that OPEC and nonmember Russia would extend their production cut, seeking to drive the market higher.

Brent crude futures LCOc1 hit a three-week high of $53.63 per barrel early on Monday and last stood at $53.43, down 0.2 percent from U.S. close.

Reuters

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