Investors returned to the risk-trade after the European Central Bank (ECB) lowered its key interest rate in an effort to spur growth and pull the euro zone out of a recession. The ECB announced an interest rate cut to a new record low of 0.50%. The ECB Chief Mario Draghi's also commented the possibility of negative deposit rates. The idea of negative deposit rates is that commercial banks will opt to lend their reserves to businesses and individuals in the real economy, rather than incur losses depositing the funds at the ECB.
Meanwhile, upbeat reading on the U.S. jobs market also supported buying. A measure of layoffs fell to its lowest level in more than five years last week, but it's unclear if U.S. employers are also boosting hiring during the slow economic recovery. The number of Americans seeking initial jobless benefits, a proxy for layoffs, decreased by 18,000 to a seasonally adjusted 324,000 in the week ended April 27, the Labor Department said Thursday. That's the lowest level for claims since January 2008, just after the last recession started. A drop in jobless claims is often accompanied by increased hiring, which would be a welcome development for the economy after March's disappointing payroll gain ignited fears of a spring slowdown.
However, market pared most of initial gain before finishing the day as many participants opted to book recent gains ahead of the U.S. Labor Department unemployment report for April later in the global day. Market pundits are hoping that confusing picture of the state of the US labor market will become clearer later after the release of highly influential US Non-farm Payrolls report. A strong figure will reduce the threat of enhanced monetary support from the Fed. Conversely, a lower-than-anticipated print could be the likelihood of more quantitative easing.
In the Asia Pacific, Australian stocks advanced strongly in early trade after Macquarie Group and Westpac Banking Corp announced results and dividend payments, but pulled back on profit-taking ahead of U.S. nonfarm payrolls data later in the global day. The benchmark S&P/ASX200 index edged down 0.5 point, or 0.01%, to 5,129.50, while the broader All Ordinaries was tad higher 1.30 points, or 0.03%, to 5,105.40.
Shares of Macquarie soared 10.9%, accompanied by strong volume, after the securities firm reported a 17% increase in full-year profit and raised its annual dividend payments of A$A1.25 per share; a 66% rise on the corresponding period last year. Westpac has recorded a 10% jump in first half profits, around 3% higher than expected. Its interim dividend has increased by 5% to 86 cents per share. A special dividend of 10cps will be distributed on 2 July. Westpac's improved profit and a higher dividend did little to boost its share price by the close, with WBC down 1%.
Resource-sector stocks also rose in Australia, spurred by an increase in commodity prices overnight. Shares of Fortescue Metals Group rose 2.4%, and Rio Tinto climbed 1.1% in Sydney.
In China, Shanghai-listed shares rebounded strongly, led by financial companies, as investors chased for bottom fishing after benchmark indices valuation fell to four month low. The benchmark Shanghai Composite ended the day 1.44% higher at 2205.50. Financial stocks were top gainer of the day, led by Poly Real Estate Group Co and Haitong Securities Co. Gains in consumer discretionary were lead by BYD Co on reports the government may issue subsidies for renewable-energy cars.
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The Non-manufacturing Purchasing Managers' Index, a comprehensive gauge of the vitality of China's service industry, lost 1.1 points to 54.5 in April, said the China Federation of Logistics and Purchasing. A reading above 50 indicates business expansion. The service PMI has stayed above that level for one year. The sub-index for new orders fell 1.1 points from a month earlier to 50.9 due to weak demand in April. The sub-index for prices slumped 4.2 points to 47.6, the first price contraction in one year. But business expectation rose to 62.5, up 0.1 points from that in March, suggesting relatively positive sentiment among service providers, the federation said.
In Hong Kong, share market ended the last trading session of the week slight higher after trimming sharp early gain led by an interest rate cut by the European Central Bank and fall in U.S. jobless benefit claims. The benchmark Hang Seng Index ended the day 21.66 points higher at 22689.96, after moving between 22678.67 and 22886.17.
New World Development jumped 3.3% to HK$13.92 after announcing plan to spin off three of its Hong Kong hotels for a separate listing. Morgan Stanley estimated that NWD could get HK$4.6 billion in cash from the potential spinoff, which would allow it to focus on its Hong Kong property development and investment business, unlock the value of hotels, create more opportunity for fund-raising and help reduce its debt level to engage in future land acquisition opportunities.
Lenovo underperformed for a second straight session in Hong Kong, slipping 1% to HK$6.83 on top of its 2.7% fall Thursday, which followed news that talks to buy IBM's low-end server business had broken down due to differences over the price.
In India, key benchmark indices edged lower in choppy trade after the Reserve Bank of India (RBI) said after a monetary policy review that its assessment of the growth-inflation dynamic provides little space for further monetary easing. The barometer index, the S&P BSE Sensex, lost 159.19 points or 0.81%, off close to 170 points from the day's high and up about 35 points from the day's low. Index heavyweight and cigarette major ITC edged lower in choppy trade. Another index heavyweight Reliance Industries (RIL) also edged lower in volatile trade.
The Reserve Bank of India on Friday lowered its benchmark lending rate by a quarter percentage point, as widely expected, but suggested further reductions were unlikely amid risks of an increase in inflation. The reduction took the repo rate, at which the RBI lends money, to 7.25%.
Elsewhere, South Korea's Kospi rose 0.4% and Taiwan's Taiex added 0.1%, while New Zealand's NZX50 lost 0.66%. Benchmarks in the Indonesia, Malaysia, and Singapore fell over 1%. Markets in Japan were closed for a public holiday.
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