Australian stocks hit a five-year high on Friday as Asian shares celebrated China's quickening growth — just a day after U.S. legislators finally broke a confidence-sapping fiscal impasse.
As the U.S. debt drama faded, speculation grew over when the Federal Reserve would pare back its stimulus reduction drive — supporting riskier assets but keeping the dollar pinned to an eight-month low.
MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.7% to a five-month high, adding to Thursday' 0.6% rise.
Investors were relieved when data showed China's economy grew 7.8% in the third quarter, its fastest pace this year and in line with expectations, as firmer foreign and domestic demand lifted factory production and retail sales.
China's CSI300 index climbed 0.7% , while Australian shares jumped to their highest level since June 2008 because Australia's exports are so closely linked to China's fortunes.
Overnight, the U.S. Standard & Poor's 500 index closed at a record high. U.S. S&P E-mini futures added 0.3% in Asian trade on Friday, indicating a further rise when Wall Street opens later in the day.
Financial bookmakers expected major European indexes to open up as much as 0.5%.
The U.S. budget deal, pulling the world's largest economy back from the brink of an historic debt default, funds the government until January 15 and raises the borrowing limit through to February 7.
Analysts said economic weakness resulting from the 16-day shutdown and uncertainty over the next round of budget and debt negotiations may keep the Fed from withdrawing monetary stimulus until at least a few months into next year.
In September, the Fed stunned markets by opting to delay trimming its $85 bln-a-month bond purchases. Stimulus tapering expectations have now been pushed back to December.
Yields on benchmark 10-year U.S. Treasuries hit a two-week low on Thursday at 2.581%. They were quoted at 2.595% in the Asian session. Prices rise as yields fall.
WOUNDED DOLLAR
The dollar held steady at 98.04 yen after shedding 0.8% against the Japanese currency overnight to log its biggest one-day percentage drop in a month.
As the yen firmed, Tokyo's Nikkei average slipped 0.2%, on track to end a seven-day winning streak — its longest such run since March.
The greenback also lost more than 1% against the euro on Thursday, but was steady near an eight-month low at $1.36645 to the euro in Asian trade on Friday.
Against a basket of major currencies, the dollar ticked up 0.1%, stabilising after hitting an eight-month trough on Thursday.
In the coming week, investors will get a slew of U.S. economic data that had been delayed by the shutdown.
All eyes will be on the crucial nonfarm payrolls report next Tuesday. The report was originally scheduled for release on October 4.
Among commodities, gold took a breather after rallying almost 3% overnight — its biggest one-day rise in a month — as the dollar weakened. It was down 0.2% at about $1,316 an ounce, though not far from a more than one-week high reached on Thursday.
U.S. crude prices rose 0.3% to just below $101 a barrel after having fallen to their lowest level in more than three months in the previous session as stockpiles at oil hub Cushing began to reverse a months-long decline, and as signs of progress in talks over Iran's nuclear programme also pressured prices.
