Asian markets were broadly higher early Tuesday, tracking overnight gains on Wall Street, as investors globally brushed off Italian voters’ rejection of constitutional reform.
The focus is “back to reflation and it’s back to assessing 2017,” said Chris Weston, chief market strategist at IG. While the issues facing Italy are systemic, they are largely contained for now, he said, adding that depending on the survey in question, most Italians still favor being part of the European monetary union.
Finance stocks in Asia were among the biggest gainers on Tuesday, helped by the calm global reaction to Italy’s referendum. In Hong Kong, banking giant HSBC 0005, +2.77% was up 2.7%, while in Japan, shares of Nomura Holdings 8604, +2.83% gain 2.9%, while Mitsubishi UFJ Financial Group 8306, +1.33% rose 1.2%. Down Under, shares of National Australia Bank NAB, +0.28% rose 0.5%.
Investors continue to bet on the so-called “reflation trade,” on hopes that President-elect Donald Trump will increase fiscal spending, lower corporate taxes and ultimately boost growth and inflation.
Those expectations were given a boost by encouraging economic data out of the U.S. and China in recent days, as well as a deal last week by key oil-producing nations to cut global crude oil output, helping lift prices.
Overnight in the U.S., the ISM non-manufacturing index rose to 57.2 in November from 54.8 in the previous month. The positive data, along with a largely muted reaction to the Italian results, helped drive the Dow Jones Industrial Average to close up 0.2% on Monday, while the tech-heavy Nasdaq added 1%.
In Hong Kong, the Hang Seng Index HSI, +0.82% was up 0.7%, with the stock market likely benefiting from Monday’s launch of a trading link between the city’s exchange and Shenzhen, home to China’s rising tech and electronic device making firms. The agreement also opens the door for Chinese investors to buy into some small cap stocks.
In Australia, shares there were boosted by further gains in oil prices to hit a fresh one-year high overnight. Prices are up as many analysts raise hopes the Organization of the Petroleum Exporting Countries is more likely to abide by this deal than others from years past.
“Besides, they only must be on their best behavior for a few months to get the market into a daily supply deficit,” said Phil Flynn, senior market analyst at the Price Futures Group, in a note.
Traders in Australia were also watching for a decision by the interest-rate setting board of the nation’s central bank due later Tuesday, with economists expecting no change from the current record low of 1.50% in the benchmark interest rate.
They are also awaiting data on Australia’s economy, which are due Wednesday. Economists predict a weaker economy in the third quarter as mining investment continues to contract and as wages and profit growth remain sluggish.
However, signs of weakness in the economy might prove temporary, given recent stellar gains in key commodity prices like coal and iron ore, the country’s biggest resource exports, analysts say.