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. Last Updated: 07/27/2016

Asian Stocks Bullish After Dow Rally




SINGAPORE -- Asian markets made a strong start to the week, with Tokyo's key Nikkei average briefly breaking above the psychologically important 15,000 mark and Seoul more than 6 percent up.


Markets were testing significant barriers on rises that traders said were driven by the record-breaking rise in the Dow Jones index last week.


Tokyo started strongly, with the Nikkei-225 breaching the 15,000 mark twice, before falling back 0.77 percent to close at 14,779.05 points.


Nevertheless, traders said the index had moved into a new trading range. They said that the yen's weakening trend, supported by Japan's recent monetary easing and New York's strong showing on Friday had also contributed to the early rise.


Technology and telecom shares led Hong Kong's Hang Seng on a roller coaster ride. The index closed up 0.2 percent at 10,263.99 after touching 10,500 before meeting significant resistance.


Korea's KOSPI 200 ended the day up a hefty 6.3 percent.


Asia's markets were showing their bullish side after Friday's rally on Wall Street that saw the Dow Jones Industrial Average jump to a record 9736.08.


Traders said investors had poured money into blue-chip stocks after a reassuring government report dashed long-standing fears of interest rate increases.


"Investors heaved a sigh of relief," said Mary Farrell, an equity strategist at PaineWeber.


The barometer of 30 blue-chip stocks gained 268.68 points, or 2.8 percent, in the second consecutive surge that pushed it past a record high set on Jan. 8 and within grabbing distance of the elusive 10,000-point mark.


"There have been whispered expectations recently that 'Oh my God, unemployment will be so low that it could spur inflation,'" said Robert Schumacher, chief strategist at Van Kampen funds. "So it was quite a relief to have that prospect removed."


These fears were allayed when the U.S. Labor Department said the average hourly wage increased just 1 cent in February, despite the addition of 275,000 jobs, more than expected and well above the 235,000 monthly average over the last six months. In 12 months, wages rose 3.6 percent f far lower than the 12-month peak of 4.4 percent in April. The unemployment rate rose a tenth of a point to 4.4 percent last month, according to a separate survey of households.


The net result of these numbers was the Wall Street equivalent of a perfect 10. The steady or dipping unemployment rate would have seemed potentially inflationary, as would have much higher hourly wages. Yet the economy continued to add many jobs, suggesting growth was not abating.


"What we see in this report is continued strong growth without any hint of inflation," said Janet Yellen, chair of the Council of Economic Advisors.


Without inflation, the Federal Reserve is less likely to raise overnight bank-lending rates to slow the economy, which expanded in the final quarter of 1998 at a 6.1-percent annual rate, the fastest pace in two years.


"The markets have loved that, because what they see is that the economy is more robust than any of us thought," said Jim Glassman, an economist at Chase Securities Inc.