Bloomberg News

Japanese Futures, Australian Stocks Advance on U.S. Budget Talks

November 18, 2012

Japanese stock futures and Australian equities rose after U.S. House Speaker John Boehner said budget talks with President Barack Obama were constructive.

American Depositary Receipts of Komatsu Ltd. (6301), the world’s second-largest maker of construction and mining equipment, surged 1.3 percent. BHP Billiton Ltd., the world’s biggest miner, gained 1 percent in Sydney as metals prices rose. Billabong International Ltd. (BBG) soared 16 percent in Sydney after the surf-wear maker said it’s considering a takeover.

Futures on Japan’s Nikkei 225 Stock Average (NKY) expiring next month closed at 9,090 in Chicago Nov. 16, up from 9,010 in Osaka, Japan. They were bid in the pre-market at 9,080 in Osaka at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index gained 0.5 percent and New Zealand’s NZX 50 Index rose 0.2 percent in Wellington.

“There were some early signs of some conciliatory language in the U.S. late Friday night that was encouraging,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian wealth management unit. The Swiss bank has about $1.5 trillion under management. “The current market retracement this month is an opportunity to buy the dip as investors navigate through the political negotiation.”

Futures on the Standard & Poor’s 500 Index advanced 0.2 percent today. The S&P 500 retreated for a second straight week last week and has lost almost 5 percent since the Nov. 6 election set up a budget showdown between Obama and the Republican-controlled House. The gauge reversed losses of as much as 0.7 percent Nov. 16, closing 0.5 percent higher, after U.S. House Speaker John Boehner said talks over the so-called fiscal cliff were “constructive.”

Obama Confident

President Barack Obama expressed confidence that he and Congress would reach an agreement that will avoid automatic spending cuts and tax increases that are scheduled to occur at the end of the year.

“I am confident we can get our fiscal situation dealt with,” Obama told reporters in Bangkok yesterday.

Japan’s Nikkei 225 Stock Average surged 3 percent last week, for its biggest gain in five weeks, amid speculation an election next month will hand power to an opposition party that advocates more economic stimulus.

Japan “is heading for the polls just after the U.S. election and the Chinese leadership transition,” said Boubouras. “The outcomes of the three largest economies will dictate policy that represents a large portion of the world’s GDP.”

Weekly Drop

The MSCI Asia Pacific (MXAP) Index dropped 1.2 percent last week as companies from QBE Insurance Group Ltd. to Tencent Holdings Ltd. (700) warned of slower earnings growth. Japanese shares rose ahead of next month’s elections. The Asian benchmark gained 9.9 percent from this year’s low on June 4 through the end of last week as central banks added stimulus to spur economic growth and data showed a slowdown in China may be ending.

Of the 560 companies in the MSCI Asia Pacific Index that posted quarterly results since Oct. 1, and for which estimates were available, 55 percent missed expectations, according to data compiled by Bloomberg News. Shares on the Asian benchmark index traded at 13.2 times estimated earnings, compared with 13.1 times for the S&P 500 Index and 11.8 times for the Stoxx Europe 600.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. retreated 3.3 percent last week as disappointing company earnings damped prospects of an economic recovery. The Thomson Reuters/Jefferies CRB Index of raw materials climbed 0.3 percent on Nov. 16.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net


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