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GLOBAL MARKETS-G20 stimulus pledge helps stocks, hurts dollar

Published 09/25/2009, 02:40 AM
Updated 09/25/2009, 02:42 AM
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* Japan bank shares sag on Nomura $5.6 bln share offering

* Dollar reverses gains, falls on G20 draft statement

* Flows to equities, bonds still solid-EPFR

By Kevin Plumberg

HONG KONG, Sept 25 (Reuters) - Financial and consumer-related shares rose in Asia and the U.S. dollar turned lower on Friday as G20 leaders pledged in a draft statement to keep some stimulus supports in place until a recovery is clearer.

Major European shares were expected to open higher, according to financial bookmakers, following the draft statements that were obtained by Reuters. U.S. stock futures reversed early losses and rose 0.3 percent.

Japan's Nikkei share average led declining equity markets in Asia, falling 2.5 percent.

Bank shares dropped after Nomura Holdings said it would raise in an equity offering up to $5.6 billion, what one broker pointed out was 24 times its average daily turnover.

Banks in Japan also received a blow from financial services minister Shizuka Kamei who expressed interest in introducing a moratorium on the repayment of the principal on mortgages and bank loans to help small and midsize businesses.

"Worries about the moratorium idea and the news about Nomura's financing are weighing down on the financial sector," Junichi Misawa, senior fund manager at STB Asset Management in Tokyo said.

The MSCI index of Asia Pacific shares outside Japan was largely unchanged, not far from a 13-month high hit on Wednesday.

The consumer discretionary sector was a clear favourite among investors in the wake of the draft G20 statements to promote more balanced current accounts.

A Thomson Reuters index of regional shares was also nearly unchanged.

WORLD INDEX DOWN

The MSCI all-country world index is down 1.7 percent so far this week, on track for the biggest weekly decline since the week of July 12. The index is up 25 percent year-to-date, but the likelihood that economic news will continue to deliver positive surprises and trigger more buying was smaller.

"Our trading stance remains 'pro-risk,' reflecting our view that this pullback -- like those before it -- will likely be temporary," said Dominic Wilson, director of global macro and markets research with Goldman Sachs, in a note.

"But industrial news is undershooting a bit lately relative to high expectations and it is less clear what will take the market higher in the very near-term."

Despite an eight-week streak of outflows from safe haven money market funds being broken, equity funds took in $5.42 billion in the week to Sept. 23, with emerging market equity funds having their biggest week of inflows since early June, fund tracker EPFR Global said in a note.

In currency markets, the dollar was down against most major currencies. The euro was up 0.1 percent to $1.4685 after climbing to the highest in a year above $1.48 on Wednesday.

Sterling continued to be an open target after Bank of England's Mervyn King said on Thursday that a weak currency was helping the domestic economy. After dropping 1.8 percent on Thursday, the pound fell a further 0.4 percent to $1.5991.

The Australian dollar, which has maintained a tight relationship with global equity markets, rose 0.3 percent to US$0.8682

U.S. Treasuries were steady after a rush out of equities on Thursday weighed on yields. Japanese government bonds gained after the overnight Treasuries rally, with the December 10-year JGB future up 0.22 point after earlier hitting the highest since Sept. 15.

U.S. crude futures recovered after tumbling over 4 percent to an eight-week low the previous day when weak U.S. home sales increased fears about the pace of economic recovery in the world's top oil consumer nation.

U.S. crude for November delivery was up 0.7 percent at $66.33 a barrel, after settling down $3.08 on Thursday, when the housing data added to demand worries following a report earlier in the week of a large build in oil stockpiles.

(Additional reporting by Aiko Hayashi in TOKYO; Editing by Jeremy Laurence)

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