Asian markets gained this week on buoyed investor confidence with indications of an improving U.S. economy and hopes of an announcement of stimulus measures by China to revive economic growth.
Hong Kong's Hang Seng Index advanced 2.4 percent and closed at 20136.12. China's Shanghai Composite Index rose 1.7 percent and closed at 2168.81.
Japan's Nikkei 225 Stock Average climbed 3.9 percent this week and closed at 8891.44. South Korea's Kospi Index was up 5.3 percent and closed at 1946.40. India's BSE Sensex gained 2.1 percent for the week and closed at 17557.74.
Markets opened Monday on a positive note following the previous week’s release of the nonfarm payrolls report by the U.S. Bureau of Labor Statistics. The higher-than-expected 163,000 increase in the nonfarm payrolls in July should ease fears of the U.S. economy following Europe into recession. It was expected to increase by 100,000 in July, up from 80,000 in June.
In another favorable report, the rate of inflation in China slowed down in July from the previous month, showing signs of a gradual decline in the price pressure to make room for monetary easing. Data from the National Bureau of Statistics showed that the consumer price index of China rose 1.8 percent in July from a year earlier, down from 2.2 percent in June.
Diminishing inflation should be good news because it can help the government invigorate growth without much concern about the rising prices.
Another factor boosting market confidence was the report about the troika, the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF), affirming Greece's compliance to the conditions for receiving the bailout package. The troika officials noted that the coalition government in Greece was moving ahead in finding budget cuts required for continuing the bailout program.
Market confidence was lifted by Germany's willingness to support the ECB's move of buying bonds. German Chancellor Angela Merkel's government indicated Monday that it would approve the ECB plan wherein the countries would accept the conditions set out by the European Financial Stability Facility (EFSF), after which the central bank would buy the bonds.
However, after four days of gains, most Asian markets fell Friday due to investor disappointment over China's worse-than-expected trade balance for July. China reported a trade surplus of $25.1 billion in July amid slower-than-expected growth in exports and imports, raising the urgent need to announce measures to stimulate the economy.
Customs data released Friday show that imports rose 4.7 percent in July compared to the same month last year, down from 6.3 percent in June. Meanwhile, exports advanced just 1 percent in July compared to the same month in the last year, down from 11.3 percent in June. Investors worry that the weak domestic demand and the continuing debt crisis in Europe have hurt China's economic growth.
Major gainers: Shares of Toyota Motor Corp rose 3.4 percent. Shares of Aluminum Corp. of China Ltd climbed 7.3 percent. Shares of DeNA Co advanced 27 percent.
Week Ahead: Market players continue to be optimistic about the stimulus measures to be announced by central banks in the U.S., Europe and China. This optimism is expected to drive the market forward. On the whole, expect a bullish trend for the next week.
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