By Hideyuki Sano | TOKYO
Asian shares firmed on Thursday thanks to stronger U.S. economic data, while growing prospects of a near-term U.S. rate hike and possible tapering of stimulus in Europe hit gold and lifted the dollar to one-month highs versus the yen.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.4 percent while Japan’s Nikkei .N225 gained 0.6 percent.
On Wednesday, U.S. S&P 500 Index .SPX gained 0.43 percent, led by banks and energy companies.
U.S. services sector activity recovered sharply in September from six-year low hit in August, following similarly upbeat news from U.S. factories on Monday.
“Both manufacturing and service indexes recovered from big falls in August. While it is not clear what the underlying U.S. economic trend is, given the recovery in Japanese and Chinese surveys the global economic cycle appears to be rebounding for now,” said Chotaro Morita, chief bond strategist at SMBC Nikko Securities.
Growing optimism on the U.S. economy boosted bets that the U.S. Federal Reserve will raise interest rates in December.
The policy-sensitive two-year U.S. note yield hit a four-month high of 0.857 percent US2YT=RR on Wednesday.
Interest rate futures FFZ6 FFF7 are pricing in about a 60 percent chance the Fed will hike by its December meeting.
The 10-year U.S. Treasuries yield US10YT=RR also rose to 1.706 percent, compared to around 1.60 percent at the start of week.
A strong U.S. payrolls report on Friday could cement expectations of a rate hike. The median forecast of economists polled by Reuters is for non-farm payroll to rise 175,000.
The rise in bond yields partly stemmed from speculation the European Central Bank may eventually taper its bond buying after Bloomberg reported on Tuesday the bank would probably wind down the monthly 80-billion euro ($90 billion) scheme.
Euro zone bond yields have picked up since then, with Germany’s 10-year Bund yield DE10YT=TWEB rising back to near zero percent from 2 1/2-month low of minus 0.16 percent hit last week.
The specter of tighter monetary policy in the U.S. and Europe hit precious metals hard.
Gold XAU= extended losses, hitting a 3 1/2-month low of $1,262.2 per ounce and last stood at $1,267.4
Silver XAG= also fell to $17.69 after having fallen to $17.565 per ounce, its lowest since late June.
In the currency market, the dollar rose to a one-month high of 103.67 yen JPY= and last stood at 103.37 yen.
The British pound GBP=D4 recovered slightly after hitting a three-decade low of $1.2686 on Wednesday on worries about Britain’s EU exit. It last traded at $1.2747.
Oil prices rose to their highest since June on a combination of the fifth unexpected weekly drawdown in U.S. crude inventories and hopes that major producers will agree to cut output next month.
The U.S. Energy Information Administration said crude stockpiles fell 3 million barrels last week, well below the build of 2.6 million barrels forecast by analysts in a Reuters poll. <EIA/S>
International benchmark Brent futures LCOc1 rose to as high as $52.09 per barrel on Wednesday, the highest since early June and last stood at $51.53, up 5 percent so far this week.
U.S. crude futures traded at $49.50 CLc1, down 0.6 percent on the day but up 2.6 percent on the week.
“Markets are hoping that they will not just agree on a cut next month but will also come up with a series of cuts in the future,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
“But unless we have more evidences of cooperation, it is hard to see oil prices rising much further.”
(Reporting by Hideyuki Sano; Editing by Eric Meijer and Kim Coghill)