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Asia markets mostly higher; Nikkei leads on stimulus hopes

CNBC logo CNBC 21-07-2016 Saheli Roy Choudhury

Asia markets mostly climbed at the open on Thursday, with Japanese shares leading regional peers as local media reports suggested a sizable stimulus package from the Abe government was forthcoming. 

In Japan, the benchmark Nikkei 225 (.N225) rallied 1.18 percent, with stocks receiving a boost from a relatively weaker yen.

"All eyes [will be] on Japan this morning, with talk of a 20 trillion yen stimulus package through a supplementary budget," said Chris Weston, chief market strategist at brokerage firm IG. "Although most economists would still stress that genuine reform still needs to be addressed to really put Japan on the right path."

Japan's Kyodo News reported that the Japanese government was arranging to compile a stimulus package of at least 20 trillion yen ($188 billion) to help the domestic economy emerge from deflation, and to fend off possible adverse effects of Brexit. The report cited sources close to the matter.

Previously, the stimulus package was expected to be a little more than 10 trillion yen, but the size was now likely to double, said Kyodo News.

In South Korea, the Kospi (.KS11) gained 0.02 percent.

Australia's ASX 200 (.AXJO) was up 0.79 percent, with most sectors rallying. The All Ordinaries Gold Index, which serves as a broad market indicator for the gold industry, was down 4.26 percent, while the materials sub-index fell 0.31 percent.

Resources producers remain in focus as they release their latest production numbers. On tap are numbers from Evolution Mining (EVN-AU) and Woodside Petroleum (WPL-AU).

Miner South32 (S32-AU), which was spun off by mining giant BHP Billiton in 2015, said on Thursday that it was well-positioned to achieve its fiscal 2017 unit cost guidance, after completing a series of restructuring initiatives, including its Worsley Alumina, Illawarra Metallurgical Coal, Australia Manganese and South Africa Manganese operations. The company also announced fiscal 2016 production numbers that were largely in line with its forecast.

Alumina production for fiscal 2016 was at 5,296 kilo tons (kt), up 3 percent on-year. Aluminum production was down 4 percent on-year, energy coal production fell 8 percent on-year and manganese alloy production declined 46 percent on-year.

South32 shares were down 0.81 percent. Among other major miners, Rio Tinto (RIO-AU) was up 0.44 percent, Fortescue (FMG-AU) higher by 0.25 percent and BHP Billiton (BLT-GB) down 0.21 percent.

Elsewhere, shares of McDonald's Holdings (2702.T-JP) in Japan jumped 8.53 percent after reports said the company announced it would collaborate on the "Pokemon Go" game "soon."

The wildly popular game was supposed to have been rolled out in Japan on Wednesday according to a report from technology news portal TechCrunch. But, TechCrunch later reported, the launch was delayed by game-maker Niantic after internal communications detailing the launch from McDonald's, which is the game's sponsor in Japan, was leaked onto the internet.

Nintendo (7974.T-JP) shares, which tumbled some 13 percent on Wednesday on the back of the news of the delay, traded up 3.73 percent on Thursday.

In the currency market, the dollar (=USD) maintained its strength against a basket of currencies, trading at 97.075, compared to levels near 96.00 in the previous week. 

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Among the major currency pairs, the Japanese yen (OSEJPY=) weakened further against the greenback, trading at 107.32, compared to the 106 handle on Wednesday afternoon local time and levels near 100 two weeks earlier.

The Australian dollar (AUD=) traded lower at $0.7462, compared to levels around $0.76 on Monday.

The euro (EURBA=) traded at $1.10, weaker than levels near $1.11 it traded last week.

Traders will likely focus on the European Central Bank (ECB) monetary policy meeting on Thursday- it will be the first monetary policy meeting held by the ECB since the U.K. voted on June 23 to leave the European Union.

"The sell-off in the euro ahead of monetary policy meeting tells us that some traders are hoping for immediate action in the form of support for Italian banks or an extension of the end date for bond purchases," Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, said.

"But we feel that the chance of a short squeeze in euro/dollar post-ECB is stronger than a steep sell-off."

In other news, earnings season gets underway in the Asia Pacific, with numbers due from Indian banks, South Korea's POSCO (549-KR), Singapore's Keppel Corporation (KPLM-SG) and IMAX China in Hong Kong.

Stateside, the Dow Jones industrial average (.DJI) ended at a record high for the seventh day in a row as better-than-expected earnings boosted optimism on Wall Street. Banks continued to turn in expectation-beating results, with Morgan Stanley (MS) reporting earnings of 75 cents per share versus consensus expectations of 59 cents.

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