Asian stocks rose the most in over two months after US President Barack Obama said congressional leaders reached an agreement to raise the nation's debt ceiling and cut the federal deficit, boosting the outlook for banks and exporters.
Toyota, the world's largest carmaker that counts North America as its biggest market, increased 1.9 per cent in Tokyo. Samsung, the South Korean television maker that reports “America” is its second-biggest market for sales, rose 3.6 per cent in Seoul. National Australia Bank, the nation's No. 3 lender by marker value, gained 3.1 per cent in Sydney. Mitsubishi UFJ Financial Group, Japan's largest listed lender by market value, jumped 5.4 per cent after reporting first quarter profit tripled.
“Investors who were very concerned about the debt-ceiling negotiations now need to buy back their positions,” said Yoshihiro Okumura, who helps manage the equivalent of $US365 million at Chiba-Gin Asset Management. in Tokyo. “There had been a lot of risk aversion because a default would have meant that the US government would lose the ability to stimulate the economy with public spending.”
The MSCI Asia Pacific Index gained 1.7 per cent to 139.06 in Tokyo, its biggest increase since May 26 and reversing three days of declines. About eight shares rose for each that declined on the gauge. The measure lost 1.6 per cent last week amid concern US lawmakers would be unable to reach an agreement to raise the nation's debt ceiling before tomorrow's deadline.
Japan's Nikkei 225 Stock Average advanced 1.8 per cent, set for its largest advance in two months. South Korea's Kospi index rose 1.8 per cent. Australia's S&P/ASX 200 Index increased 1.9 per cent, its biggest increase since September last year. Hong Kong's Hang Seng Index climbed 1.5 per cent, while China's Shanghai Composite Index rose 0.2 per cent.
US futures
Futures on the Standard & Poor's 500 Index gained 1.5 per cent today, snapping a seven-day losing streak. Obama announced that leaders of both parties in the US House and Senate had reached a tentative bipartisan agreement to raise the debt ceiling, preparing to sell the deal to skeptical Republicans and Democrats ahead of possible on Aug. 2.
“The leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default,” Obama said in a speech from Washington.
In New York, the S&P 500 fell 0.7 per cent to 1292.28 on July 29 as economic growth trailed forecasts and investors awaited the outcome of negotiations to avoid a debt default.
Toyota, Honda
Toyota, which receives 28 per cent of its revenue from North America, rose 1.9 per cent to 3215 yen in Tokyo. Honda, which gets 83 per cent of its sales from outside Japan, advanced 2.8 per cent to 3165 yen. Samsung, which receives 22 per cent of its revenue from America, rose 3.6 per cent to 874,000 won. Li & Fung, the largest supplier of toys and clothes to retailers including Target and Wal-Mart, climbed 2.6 per cent to $HK13.30.
Banks posted the biggest increase among the MSCI Asia Pacific Index's 10 industry groups, providing the greatest support to the index.
ANZ rose 3 per cent to $21.46, while Commonwealth Bank, the country's No. 1 lender, advanced 2.6 per cent to $50.53. Sumitomo Mitsui Financial Group, Japan's second-biggest bank by market value, rose 3.7 per cent to 2,525 yen. National Australia Bank climbed 3.1 per cent to $24.75.
Government shutdown fears
Stocks are gaining because “fears of a partial US government shutdown or default have been the main worry for investors recently,” given the potential impact on Asian exporters, said Sydney-based Shane Oliver, head of investment strategy at AMP Capital Investors.
“Nervousness is likely to remain high as the deal will still have to pass both houses of Congress.”
A gauge of raw-material and energy producers rose 1.7 per cent. Copper gained to near a more-than-three-month high on optimism the US, the second-largest user of the metal, will avoid a default. Aluminium and zinc also rose.
BHP Billiton, the world's No. 1 mining company which counts China as its biggest market for sales, advanced 2.2 per cent to $42.31 in Sydney. Rio Tinto, the world's second-largest mining company by sales, advanced 2 per cent to $81.62. PetroChina rose 2.2 per cent to $HK11.28.
China PMI
A Chinese manufacturing index was higher than economists estimated in July, signaling the world's second-biggest economy is withstanding increased interest rates and tightened credit. The Purchasing Managers' Index was at 50.7 for July compared with 50.9 in June, the China Federation of Logistics and Purchasing said in a statement today. That was more than every forecast in a Bloomberg News survey of 13 economists. The median estimate was for a reading of 50.2.
Mitsubishi UFJ jumped 5.4 per cent to 413 yen, the biggest support to the MSCI Asia Pacific Index. The bank rose after reporting net income tripled to 501 billion yen in the three months ended June 30 from 166 billion yen a year earlier, as gains from Morgan Stanley preferred shares outweighed a drop in loan income.
Positive earnings
Of 264 companies in the MSCI Asia Pacific Index that have reported net income from July 11 through 1 p.m. in Tokyo today, 119 have exceeded analysts' estimates while 89 have fallen short, according to data compiled by Bloomberg. Overall, earnings declined 5.7 per cent, the data show.
“More and more companies are reporting earnings that exceed analysts' estimates or raising profit forecasts, and that's bringing a feeling of hope,” said Kazuhiro Takahashi, a general manager at Daiwa Securities Capital Markets in Tokyo.
The MSCI Asia Pacific Index lost 0.7 per cent this year through July 29, compared with a gain of 2.8 per cent by the S&P 500 and a drop of 3.8 per cent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.4 times estimated earnings on average, compared with 12.9 times for the S&P 500 and 10.8 times for the Stoxx 600.
Itochu Techno-Solutions, a computer-network-systems developer, surged 10 per cent to 3350 yen. The company, which was set for the biggest advance on the MSCI Asia Pacific Index today, said it plans to buy back up to 2.89 per cent of its outstanding shares for as much as 5 billion yen, as well as retire 3.1 per cent of its shares on Aug. 8.
Among stocks that fell, Formosa Petrochemical Corp. dropped 6.9 per cent to $NT101. Chairman Wang Wen-chao and President Su Chi-yi announced their resignations after a fire broke out at a plant early on July 30. Formosa Chemicals & Fibre and Formosa Plastics also declined. The companies were among the biggest declining stocks on the MSCI Asia Pacific Index today.