US greenback strikes, financial restoration, crude oil costs

The Tokyo Stock Exchange (TSE), operated by Japan Exchange Group Inc. (JPX), in Tokyo, Japan on Monday, November 30, 2020.

Toru Hanai | Bloomberg via Getty Images

SINGAPORE – Asia Pacific markets battled for gains on Friday as investors became cautious despite a positive close in the previous session.

The Australian ASX 200 fell 0.7% as all sectors turned red. Energy and materials fell 1.4% and 0.92% respectively, while the heavily weighted financials sub-index lost 0.46%.

The Japanese market returned to trading after closing for a holiday on Thursday. The Nikkei 225 benchmark index fell 0.43% while the Topix index was near flat. In South Korea, the Kospi index stumbled 0.52%.

Mainland Chinese stocks also fell: the Shanghai Composite fell 0.53% after the market opened, while the Shenzhen component fell 0.3%. In Hong Kong, the Hang Seng Index fell 1.31%.

The data showed that China’s factory activity expanded more slowly than expected in April as the official purchasing managers’ index for manufacturing fell to 51.1 from 51.9 in March. A value above 50 indicates an expansion.

Friday’s session followed an overnight session on Wall Street with major US indices higher. Economic activity picked up in the first three months of 2021, when GDP rose 6.4% on an annual basis, but it remained slightly below expectations.

“Strong economic momentum in the US has positive effects on the global economy,” Kim Mundy, senior economist and currency strategist with the Commonwealth Bank of Australia, wrote in a morning note.

“In our view, the global economy will benefit from spill-over from higher US imports. The combination of low interest rates, an improving US economy and an improving global economy is a recipe for the USD to continue its downtrend,” said Mundy added.

Currencies and oil

The US dollar was last traded at 90.628 against a basket of its competitors. The dollar index is lower than last week.

The Japanese yen traded hands at 108.82 per dollar, comparatively weaker than below 108.00 when it traded last week. Elsewhere, the Australian dollar rose 0.15% to $ 0.7776.

Oil prices rose overnight on a weaker dollar and economic optimism but pulled back on Friday during Asian trading hours. Nevertheless, prices are trading at a level that has not been reached since March.

US crude fell 0.48% to $ 64.7 while the global benchmark Brent index fell 0.23% to $ 68.40 a barrel.

“Crude oil prices rebounded as there were signs of further strength in demand,” ANZ analysts wrote in a morning note. “The emergence of several US cities from lockdown builds confidence in increased demand for gasoline ahead of the major US summer driving season.”

They added that renewed optimism in the US and Europe “is overshadowing headwinds in India, where a second wave of Covid-19 infections is leading to new travel restrictions”.

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