March 22, 2016/AfDB

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Mon Mar 14, 2016/Reuters

By Lisa Twaronite

Asian shares began a central-bank focused week on firm footing on Monday, buoyed by gains on Wall Street as well as glimmers of strength in weekend data from China.

Financial spreadbetters expected Britain’s FTSE 100 .FTSE to open 0.3 percent higher. Germany’s DAX .GDAXI was seen up by 0.5 percent, while France’s CAC .FCHI was seen 0.2 percent higher.

But global investors are expected to remain cautious ahead of policy decisions by the Bank of Japan on Tuesday, the U.S. Federal Reserve on Wednesday and the Bank of England on Thursday.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was off session highs but still up 0.8 percent, while Japan’s Nikkei stock index .N225 added 1.7 percent.

In China, the blue-chip CSI300 index .CSI300 rose 1.9 percent, while the Shanghai Composite Index .SSEC gained 2 percent, after both had lost more than 2 percent last week.

Mainland investors were encouraged by a regulator’s assurance that it was premature to consider withdrawing government bailout funds from the market, and comments that dispelled fears of a flood of initial public offerings.

On Friday, the S&P 500 .SPX ended at its highest level of the year as oil prices extended gains and investors reassessed stimulus steps taken by the European Central Bank last week.

The BOJ began its own two-day meeting on Monday, and is expected to keep policy unchanged after stunning markets by adopting negative interest rates in late January.

However, its board could discuss whether to exempt $90 billion in short-term funds from the BOJ’s newly imposed negative rate, people familiar with the matter said, after the securities industry warned that investment money would be driven into bank deposits.

The Fed and BOE are also seen standing pat at their respective meetings later this week, in the wake of the ECB’s move last week to expand its easing program.

“I don’t think investors are expecting anything drastic from the BOJ, especially given the fact that they are meeting before the FOMC and will be reticent about making a big aggressive gamble ahead of a Fed meeting,” said Stefan Worrall, director of Japan equity sales at Credit Suisse.

China data on Saturday showed further weakness in much of the economy, but also contained a few bright spots.

Manufacturing output in January and February grew at its weakest pace since 2008, while retail sales rose at their slowest rate since May 2015.

But fixed-asset investment, a crucial driver of the economy, gained 10.2 percent in the first two months compared with the same period a year earlier, while property sales and home mortgages climbed sharply.

“Chinese data showed further weakening across the board, but it is clear that government spending and a recovery in the real estate market are helping hold up growth,” Angus Nicholson, market analyst at IG Markets, said in a note to clients.

“China looks to be returning to a very familiar investment and real estate-driven growth pattern, somewhat at odds with their claims of economic rebalancing,” he said.

People’s Bank of China (PBOC) Governor Zhou Xiaochuan said over the weekend that central bank won’t resort to excessive stimulus to bolster growth but will keep a flexible stance in the event of an economic shock.

The dollar was steady against a basket of currencies, with the dollar index .DXY at 96.175, holding above a one-month low of 95.938 touched on Friday.

Against the yen, the dollar edged down slightly to 113.78 JPY=, though it remained within its recent ranges.

The euro EUR= added 0.1 percent to $1.1161, well above last week’s low of $1.0821 plumbed after the ECB’s stimulus expansion.

Crude oil prices gave back some last week’s gains on Monday, following sharp rises on Friday after the Paris-based International Energy Agency said the market may have hit bottom.

U.S. crude CLc1 slipped about 0.6 percent to $38.28 a barrel after rising 2 percent on Friday, when it hit a 2016 high and also logged its fourth straight gaining week.

Brent LCOc1 edged down about 0.1 percent to $40.34 a barrel after gaining nearly 1 percent in the previous and 4 percent for the week, its third weekly gain in a row.

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Nigeria’s central bank plans to shift some of its reserves into yuan from dollars as the Chinese currency takes a greater role in global trade, deputy central bank Governor Kingsley Moghalu said.

The bank will increase the yuan’s share of reserves to as much as 7 percent from 2 percent, Moghalu said in an interview in London, without specifying a timeframe for the change. Nigeria currently holds about 85 percent of its reserves in dollars, he said.

“It was clear to us that the future of international economics and trade will shift in large part to business with and by China,” Moghalu said. “Ultimately the renminbi is likely to become a global convertible currency.”

The central bank started to diversify its reserves into yuan in 2011 and is working with the People’s Bank of China to boost the holdings as soon as the relevant structures are in place, he said. Nigeria’s naira weakened 0.3 percent to 162.74 per dollar at at 3:05 p.m. in Lagos.

Source: Bloomberg (by Maria Levitov)

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