Risk assets rebound on earnings, policy expectations

Tokyo—Risk assets rebounded broadly as a sharp sell-off over the past two sessions lured bargain hunters, with sentiment bolstered by positive American corporate earnings and data supporting the case for ongoing U.S. monetary stimulus.

The yen resumed its downtrend as markets regained some stability, as investors were seen to be liquidating some of their excessively built-up positions.

Gold, which led the heavy liquidation of assets across the board after weaker-than-expected Chinese and U.S. economic reports earlier in the week stoked concerns about slowing global growth, rose 1 percent to a session high of $1,381.80 but remained volatile.

Crude oil futures also firmed, with U.S. crude inching up 0.1 percent to $88.84 a barrel, crawling up from a four-month low of $86.06 hit. Brent rose 0.4 percent to $100.29 a barrel, after breaching below $100 for the first time in nine months.

“We’re now going through an uncertain period for risk assets, really. The market is becoming a bit choppy and just range-bound as investors become a bit uncertain which way the market wants to swing this time around,” said Stan Shamu, market strategist at IG Markets.

The MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4 percent after shedding as much as 1 percent to come close its 2013 low in the previous session.

The recovery in commodities soothed investor sentiment in resources-rich Australia, pushing its shares up 0.9 percent.

South Korean shares bucked the trend, easing 0.2 percent on earnings concerns after Samsung Engineering reported first-quarter losses, highlighting the vulnerability of firms with overseas exposures.

“The main board has lost ground, nearing a price-to-book value of 1 as weak corporate earnings from companies that earn their living through overseas orders have fanned investor caution,” said Han Beom-ho, an analyst at Shinhan Investment Corp, of Seoul shares.

The International Monetary Fund trimmed projections for global economic growth for this year and next to take into account government spending cuts in the United States and the latest struggles of recession-stricken Europe.

Japan’s Nikkei average climbed 1 percent as the yen weakened. The Nikkei tumbled as much as 2 percent when the yen’s rebound took a toll on sentiment.

“After seeing a pull-back, there is an opportunity for buying on the dips,” Yutaka Miura, a senior technical analyst at Mizuho Securities, said of Japanese shares.

European shares fell on weak ZEW German consumer confidence numbers and heightened concerns about the earnings outlook for European companies. But U.S. stocks gained over 1 percent after strong earnings from some of America’s biggest companies such as Coca-Cola and Johnson & Johnson.

U.S. consumer prices fell in March for the first time in four months and factory output slipped, reinforcing the view that the Federal Reserve will maintain its ultra-easy monetary policy stance to support economic growth.

“We still believe that the recent volatility in the commodity prices was mainly driven by long position liquidation, while the underlying backdrop remains risk-positive due to expanding global monetary easing,” said Vassili Serebriakov, strategist at BNP Paribas.