Asia stocks hit 10-year high on global growth optimism, dollar strong

Asian Stock Markets

Asian stocks rose to a 10-year high on Tuesday as investors took heart from further evidence of strength in the global economy, while the dollar hovered near a one-week high against its peers thanks to higher U.S. yields and a floundering euro. 

European markets were expected to be somewhat more subdued in early trade, with financial spreadbetters expecting Britain's FTSE .FTSE to open 0.05 percent higher and Germany's DAX .GDAXI and France's CAC .FCHI to open unchanged.

Gains on Wall Street overnight helped MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rise 0.8 percent to a fresh decade-high.

Japan's Nikkei .N225 advanced 0.7 percent, while South Korea's KOSPI .KS11 rose 0.1 percent and 

Australian stocks climbed 0.3 percent. Shanghai .SSEC added 0.5 percent and Hong Kong's Hang Seng .HSI was 1.3 percent higher.

Equity markets have enjoyed strong support this year thanks to rising corporate earnings on the back of an improving global economy.

That confidence was again on display overnight, with upbeat data in Germany helping the benchmark DAX .GDAXI brush off worries over the collapse of German coalition government talks.

German data showed strong industrial activity, while the Conference Board’s leading economic index for the United States rose 1.2 percent in October, double the rate economists polled by Reuters had expected.

Wall Street was led up by telecom and tech shares, with the Dow .DJI edging back towards record highs scaled two weeks ago. [.N]

In currencies, the dollar index against a basket of six major currencies stood near a one-week peak of 94.104 .DXY touched overnight. The greenback was boosted by rising bond yields, with the two-year U.S. Treasury yield US2YT=RR touching a nine-year high of 1.755 percent overnight.

The yield has risen as investors priced in more interest rate hikes by the Federal Reserve, while the Treasury is expected to increase debt issuance with a focus on short- and intermediate-dated maturities.

The dollar was also lifted as the euro has been weakened by political risks arising from German Chancellor Angela Merkel’s failure to form a three-way coalition government, thrusting Europe’s biggest economy into a political crisis.

Merkel, whose conservatives were weakened after they won an election in September with a reduced number of seats, said she would inform the German president that she could not form a coalition, after the pro-business Free Democrats withdrew from negotiations.

The euro inched up 0.1 percent to $1.1745 EUR= but remained near a six-day low of $1.1722 touched on Monday. A week ago, the common currency had rallied to a one-month high of $1.1862 on robust German growth data.

The dollar was steady at 112.545 yen JPY=, having bounced from a one-month low of 111.890 set overnight.

The Australian and New Zealand dollars were both slightly lower at $0.7543 AUD=D4 and $0.6804 NZD=D4, respectively.

Oil prices were little changed as expectations of an extended OPEC-led production cut were cancelled out by rising U.S. output.

Brent crude futures LCOc1 were at $62.30 per barrel, 8 cents above their last close. U.S. crude CLc1 were 3 cents higher at $56.45 per barrel.

Spot gold XAU= crawled up 0.25 percent to $1,279.76 per ounce after sliding more than 1 percent overnight on the dollar’s bounce.