Asian shares set to finish 2020 at record high on economic hopes

Asian shares edged up on Thursday and were set to end a tumultuous 2020 at record highs, while growing investor hopes for a global economic recovery caused the dollar to fall further against most main currencies.

MSCI’s gauge of Asia-Pacific shares excluding Japan rose 0.1 percent to its latest peak, having explored new highs repeatedly late in the year. But year-end trading was typically thin with many investors on holiday.

The index is set for a fourth-quarter gain of more than 19 percent, which would be its strongest three-month performance since 2009 and a yearly rise just shy of 20 percent, which would be its highest since 2017.

“A lot of the rise in the second part of the quarter is because the political risk evaporated,” said Kerry Craig, Global Market Strategist, JP Morgan Asset Management, citing the US election, hopes for an easing in US-China trade tensions and the Brexit deal.

Clouds on the horizon?

Looking to 2021, Craig said investors were trying to balance the potential for rising inflation against a likely economic recovery and assess whether that rebound might be impeded early in the year by new strains of COVID-19 and the struggles of vaccine distribution.

Chinese blue chips rose 1.45 percent on Thursday after official data showed that activity in China’s service and factory sector expanded in December, albeit both at a slower pace than the previous month. The Hong Kong benchmark also rose 0.26 percent.

Australian shares fell 0.80 percent after tighter restrictions on movement were announced in an effort to quash fresh COVID-19 cases.

Markets in Japan and South Korea are on holiday.

E-Mini S&P futures rose 0.10 percent.

The upbeat mood, reflected in overnight gains on Wall Street, drubbed the “safe-haven” dollar and supported almost all other key global currencies.

The dollar dropped against a basket of currencies, sinking 0.074 percent to 89.528, after earlier touching its lowest level since April 2018.

Oil drop

Oil prices bucked the trend, however, retreating a shade as swelling crude supplies led some traders to view any economic recovery ahead to be gradual rather than swift.

US West Texas Intermediate crude shed 0.23 percent to trade at $48.29 a barrel, far below about $62 at the start of 2020 and Brent was trading down 25 cents, or 0.5 percent, at $51.38.

Global crude oil markets have lost about a fifth of their value in 2020 as strict coronavirus lockdowns paralysed economic activity and travel, but prices have rebounded strongly from their lows as governments rolled out stimulus measures.

Gold dropped 0.14 percent to $1,89.62 an ounce. The precious metal has risen more than 24 percent this year, its best year since 2010 as investors looked to safe havens and as the dollar wilted.

Treasuries were little changed, with benchmark US 10-year yields at 0.9264 percent and two-year yields at 0.1250 percent.