Asia cheered by China, European stimulus

Sun Nov 23, 2014 6:27pm EST
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By Wayne Cole

SYDNEY (Reuters) - Asian share markets followed the dollar higher on Monday as the prospect of further policy stimulus in China and Europe whetted risk appetites while sending the euro skidding.

The single currency was matching 28-month lows in early trade having shed 1.2 percent on Friday when European Central Bank President Mario Draghi surprised by declaring his commitment to fighting deflation.

That came hot on the heels of an unexpected cut in interest rates from the People's Bank of China, and sources told Reuters Beijing was ready to ease further to head off slowing inflation.

"The big change is how much more supportive we expect major central banks to be. A mild pickup in growth, low inflation and supportive monetary policy all bode well for risk assets," said analysts at Barclays.

"We are especially bullish on Japanese equities, currency hedged. The Japan macro trade has far more room to run."

Tokyo's market was closed for a holiday on Monday, but MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.24 percent. Australia's main index climbed 0.9 percent.

The Dow and S&P 500 both added 0.5 percent on Friday, while the Nasdaq put on 0.24 percent. Germany's DAX and France's CAC rose nearly 3 percent in anticipation of more action by the ECB.

"We will do what we must to raise inflation and inflation expectations as fast as possible," Draghi told an audience of bankers in Frankfurt, seemingly inching closer to outright purchases of government bonds.   Continued...

Pedestrians with umbrellas walk past an electronic board showing Japan's Nikkei average (top middle L) and the exchange rates between the Japanese yen and the U.S. dollar (top middle R), outside a brokerage in Tokyo November 11, 2014. REUTERS/Yuya Shino