Asia Stocks Gain as Yen, Dollar Slide on Stimulus

Asian stocks rose, with the region’s benchmark index set for its biggest two-day rally in a month, as Citigroup Inc. raised global profit estimates and Japan’s shrinking economy lifted chances for more stimulus. The yen and dollar fell against the euro for a fourth day. Silver rallied.

The MSCI Asia Pacific Index added 0.4 percent at 12:33 p.m. in Tokyo, extending yesterday’s 0.9 percent jump. Standard & Poor’s 500 Index futures advanced 0.1 percent. Japan’s currency fell to 116.57 per euro from 116.37 yesterday, while the Dollar Index lost 0.3 percent. The Singapore dollar and Malaysian ringgit both advanced 0.5 percent versus the greenback. S&P’s GSCI Index of 24 raw materials gained 0.2 percent, with silver surging 1.2 percent and oil climbing 0.3 percent in New York.

The Bank of Japan may face increased pressure to add stimulus after the economy shrank more than estimated following the March 11 temblor, while Federal Reserve Bank of St. Louis President James Bullard said the U.S. central bank may keep its monetary-policy unchanged until late this year. Singapore raised its growth forecast for 2011, while Citigroup predicted global per-share earnings may rise 18 percent this year.

“People are increasingly reassured that there’s plenty of liquidity to support markets,” John Praveen, the Newark, New Jersey-based chief investment strategist at Prudential International Investments Advisors, said in a Bloomberg Television interview. “The U.S. economy is going to rebound in the second quarter and interest rates are going to remain low. Reconstruction is going to be funded by public spending and the Bank of Japan’s additional stimulus.”

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Asian Stocks, Dollar, Copper Climb as China Refrains From Increasing Rates

Asian stocks and commodities advanced while the dollar strengthened for a sixth day after China refrained from raising interest rates and as optimism increased that the U.S. economic recovery is gathering steam.

The MSCI Asia Pacific Index climbed 0.3 percent to 133.42 as of 12:10 p.m. in Tokyo. Futures on the Standard & Poor’s 500 Index were little changed after the gauge advanced for a fourth day on Dec. 10. Copper rallied as much as 1.1 percent in London and rubber rose to a record. The Dollar Index, which tracks the currency against six major peers, added 0.2 percent, and was set for its longest stretch of gains since June.

China on Dec. 10 ordered banks to set aside larger reserves and didn’t announce an interest-rate increase, even as data released the following day showed the inflation rate reached 5.1 percent in November while industrial-output growth and retail sales grew. As Federal Reserve policy makers meet tomorrow, a U.S. Commerce Department report will likely show retail sales climbed for a fifth straight month, adding to data that showed consumer confidence increased in December to a six-month high.

“A rate increase would produce a greater impact on the wider economy, so their cautious measure is positive for the market” said Lam Chee Mun, a fund manager at TA Investment Management in Kuala Lumpur.

Almost two stocks rose for every one that fell on the MSCI Asian index, which has climbed 11 percent this year. The Shanghai Composite rose 1.2 percent, trimming its 2010 loss to 12 percent, still the steepest drop among Asian markets this year. China Vanke Co., the nation’s largest developer by value, rose 1.2 percent.

‘More Effective’

Consumer prices rose a more-than-forecast 5.1 percent from a year earlier, a statistics bureau report showed in Beijing over the weekend. Producer-price inflation was 6.1 percent, higher than any of 28 economists surveyed by Bloomberg News had estimated. The central bank boosted reserve requirements by 50 basis points starting Dec. 20, the third increase in five weeks, instead of raising borrowing costs.

“The government seems to be using reserve requirements at the moment as a more effective tool,” Hugh Simon, co-manager of the Dreyfus Greater China Fund, said in a Bloomberg Television interview. “They need to have some relief about inflation. Inflation this time, rather than 2008, is coming from the demand side as people are getting paid more.”

Westpac Banking Corp. paced a rally in Australia’s four largest lenders after analysts including Jarrod Martin of Credit Suisse Group AG said the companies may emerge as victors from Treasurer Wayne Swan’s package to promote banking competition. Westpac, Commonwealth Bank of Australia, National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd. rose at least 1.1 percent each after Swan’s 13-point plan stopped short of investors’ most pessimistic expectations.

Copper, Rubber

Copper for three-month delivery on the London Metal Exchange rose to as high as $9,087 a metric ton, near the record $9,091 reached on Dec. 9. Zinc gained 2.4 percent while nickel rose 0.6 percent. Rubber futures in Tokyo advanced to an all- time high of 390.3 yen per kilogram following rains in Thailand, the largest exporter.

The dollar rose against most of its 16 major counterparts and traded at $1.3188 per euro from $1.3226 in New York on Dec. 10. Retail sales climbed 0.6 percent in November after advancing 1.2 percent in October, according to the median estimate of economists in a Bloomberg News survey before tomorrow’s figures. Confidence among U.S. consumers increased in December to a six- month high, the Thomson Reuters/University of Michigan preliminary index of consumer sentiment showed on Dec. 10.

Treasuries fell before the release of the data, sending yields on the 10-year note higher by two basis points to 3.34 percent. Fed policy makers may signal this week they will contemplate boosting purchases of government debt to support job growth. Chairman Ben S. Bernanke said earlier this month purchases of government securities may be increased beyond the $600 billion already announced under the Fed’s so-called quantitative easing program.

Euro’s Survival

The euro retreated against all 16 major peers before a Dec. 16 and 17 European Union meeting, where leaders will discuss the creation of a permanent mechanism to shore up over-indebted countries. Against the yen, the shared currency traded at 110.82 from 111.04 in New York.

The currency’s survival is “non-negotiable,” requiring budget vigilance and closer economic cooperation to overcome “structural weaknesses” within the euro region, German Chancellor Angela Merkel and French President Nicolas Sarkozy said Dec. 10. Splits between EU governments on how to contain the debt crisis have emerged, with Germany opposed to euro-area bonds that Italy, Belgium and Luxembourg favor.

“Europe’s large nations may find it hard to provide further aid when they think about their own domestic factors,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “The euro is struggling to rise, as the dollar is regaining strength.”

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