SYDNEY – Asian stocks camped out at 18-month peaks on Wednesday having climbed for five straight sessions, while the British pound was licking fresh wounds as revived Brexit fears came back to haunt it.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was dead flat near its highest since June last year. Japan’s Nikkei .N225 dipped 0.4% and off a 2019 top.
Shanghai blue chips .CSI300 were steady, after hitting an eight-month peak on Tuesday and as Beijing trimmed another short-term interest rate.
E-Mini futures for the S&P 500 ESc1 barely budged, as did futures for the EUROSTOXX 50 STXEc1 and the FTSE FIIc1.
Upbeat economic news had helped the S&P 500 reach a record for the fourth straight session, building on its 27% gain this year. The Dow .DJI ended Tuesday up 0.19%, while the S&P 500 .SPX gained 0.07% and the Nasdaq .IXIC 0.11%. [.N]
U.S. housing starts were surprisingly strong in November, and building permits rose to the highest level since May 2007. Manufacturing output picked up more than expected as a strike at General Motors Co (GM.N) ended.
A run of better data recently has helped calm fears of recession while the “phase one” Sino-U.S. deal on trade seems to have lifted some of the uncertainty on the global outlook.
The sea change was clear in BofA Global Research’s latest survey of fund managers with recession concerns diving 33 percentage points to a net 68% of investors saying a recession is now unlikely in 2020.
Global growth expectations jumped 22 percentage points, marking the biggest 2-month rise on record. As a result, funds’ allocation to global equities climbed 10 percentage points to a net 31% overweight, the highest level in a year.
Yet it might be too soon to declare an all-clear on the political front with UK Prime Minister Boris Johnson upsetting markets by taking a hard line on Brexit talks.
Johnson will use the prospect of a Brexit cliff-edge at the end of 2020 to demand the EU give him a comprehensive free trade deal in less than 11 months.
The threat of a hard exit sent shivers through sterling, which slid 1.5% in its largest one-day fall this year.
The pound was down another 0.2% on Wednesday at $1.3096 GBP=D3 having shed all the gains made during the Conservative Party’s big election win. [GBP/]
“Johnson’s move aimed at cancelling the possibility of an extension, has essentially increased the possibility of a no deal Brexit,” said Rodrigo Catril, a senior FX strategist at NAB.
“It suggests sterling’s path in 2020 looks set to be a volatile one, a hard Brexit cannot be ruled out, but the probability of a positive Brexit resolution has also increased.”
Sterling’s slide gave the dollar index a lift to 97.243 .DXY against a basket of currencies, extending a bounce from last week’s five-month low of 96.588.
The euro also surged on the pound EURGBP= and was a shade softer on the dollar at $1.1134 EUR=. The yen was little changed at 109.45 per dollar JPY=.
Spot gold idled at $1,476.63 per ounce XAU=, after a couple of very quiet sessions.
Oil prices eased from three-month highs as data showed U.S. crude stocks rose unexpectedly in the most recent week. [O/R]
U.S. crude CLc1 fell 42 cents to $60.52 a barrel, while Brent crude LCOc1 futures lost 31 cents to $65.78.