By Ian Chua and Vidya Ranganathan
SYDNEY/SINGAPORE (Reuters) – Asian stocks rose on Monday as investors gave the thumbs up to an upbeat U.S. labour force report that sent Wall Street to an all-time closing high last week, while the dollar held its ground against the yen.
MSCI’s broadest index of Asia-Pacific shares outside Japan climbed nearly one percent with Australia’s main share index also about a percent higher. Malaysian shares were the biggest gainers, rising 3 percent after the ruling coalition government won a tight election.
Japanese financial markets are shut on Monday for a public holiday and will reopen on Tuesday.
The gains in stock markets came after data on Friday showed U.S. employment rose at a faster pace than expected in April and hiring was much stronger than previously thought in the prior two months, a relief to investors nervous about a U.S. slowdown.
But other U.S. data, including a survey of the vast services sectors, was less encouraging and led investors to suspect that the Federal Reserve will probably maintain its aggressive stimulus programme.
“We take the April employment report, in conjunction with other data, as supportive of the Fed keeping its (debt) purchase programme intact,” analysts at Barclays Capital wrote in a note.
“Labour market and inflation trends are soft enough to reduce the likelihood of tapering, in our view, but steady enough to keep the Fed from increasing the pace of its purchases.”
The data helped lift U.S. Treasury yields. The dollar however was less consistent, gaining against the Australian dollar and keeping Friday’s gains against the low-yielding yen, but losing ground to emerging Asian currencies.
Having rallied more than 1 percent against the yen on Friday, the dollar last traded at 99.06 yen, nearly flat on the day. It is within a hair’s breath of a 4-year peak near 100 scaled last month.
The yen was likely to stay on the defensive after the boost to risk sentiment from the better-than-expected U.S. jobs data, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
“Rather than dollar strength, the sentiment is more along the lines of going risk-on. It feels like yen-selling with cross/yen pairs leading the way,” Okagawa said.
While other currencies in Asia outperformed the greenback, the Aussie slipped 0.3 percent to $1.0285, although it stayed off last week’s low near $1.0220.
The decline followed local retail sales data, where the monthly data disappointed markets but the quarterly number, coupled with U.S. jobs data, gave markets reason to slightly tone down expectations of a cut in interest rates at the Reserve Bank of Australia’s policy meeting on Tuesday.
Commodities also added to gains, having powered higher on Friday in the wake of the U.S. jobs report. U.S. crude rose more than one percent towards $97.00 a barrel, reaching fresh one-month highs.
Copper is in focus after it stole the limelight with a 6.5-percent rally to $7,270.00 on Friday.
However, to put its move in perspective, copper had fallen nearly 20 percent in the past three months partly on worries about a slowing global economy.
Malaysia’s ringgit and stock market were however the regional standouts on Monday, with the ringgit hitting a 20-month high after Sunday’s election saw the governing coalition extend its half-century rule, albeit with its worst-ever performance.
The National Front, or Barisan National (BN), won 133 seats in the 222-member parliament in Sunday’s election, although it failed to regain the two-thirds majority it lost for the first time in 2008.