TOKYO, 11 NOV 2014 – Japanese shares outperformed in Asia on Tuesday, with the Nikkei stock average rising to a 7-year high as speculators snapped up futures and call options as they wagered that Prime Minister Shinzo Abe may postpone a planned sales tax increase.
Some of that luster, as well as fresh closing highs on Wall Street overnight for both the S&P 500 .SPX and the Dow industrials.DJI, was seen rubbing off on European bourses.
“European equities are set to perk up on overnight gains in the U.S. and Asia. Confidence in the U.S. economy seems to be brushing off any domestic concerns and the bulls are running with it,” Capital Spreads dealer Jonathan Sudaria said in a note.
Capital Spreads predicted Britain’s FTSE 100 .FTSE would edge up 9 points, or 0.1 percent; France’s CAC 40 .FCHI would open up 13 points, or 0.3 percent, and Germany’s DAX .GDAXI would open 20 points higher, or 0.2 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS wavered between positive and negative territory and was last down about 0.2 percent.
Japan’s Nikkei stock average .N225 surged more than 2 percent, brushing a 7-year high and extending gains as the yen turned lower in afternoon trade and futures jumped as investors pondered the possibility Abe may postpone a planned sales tax increase and call early elections.
Local media reported on Tuesday that Abe might call a snap vote before the end of the year if he decided to delay a planned hike in the national sales tax to 10 percent from 8 percent that is scheduled to take place in October 2015.
An April hike in the sales tax by three percentage points chilled consumption in the second quarter, driving the Japanese economy into its biggest slump since the global financial crisis.
Sentiment was also boosted by the Bank Of Japan’s move on Monday to purchase 38 billion yen ($331.2 million) of exchange-traded funds (ETFs), as part of its expanded economic stimulus steps. The news was announced after markets closed on Monday.
Data released before the open showed Japan’s current account surplus rose more than expected in September from a year earlier, as income from investments overseas bolstered the balance of payments.
Chinese shares .CSI300 turned down 0.7 from a three-year high earlier in the session, a day after they surged 2.5 percent on announcement of a deal that will give global investors easier access to China’s $3.9 trillion stock market.
Crude oil prices shrugged off concerns about conflicts in Libya and Ukraine and extended losses. Fears about a global supply glut and slowing growth have pushed oil prices down nearly 30 percent since June. U.S. crude CLc1 shed about 0.4 percent to $77.10 per barrel, while Brent crude LCOc1 shed 0.3 percent to $82.08.
U.S. Treasury prices slipped overnight, putting a solid floor under the dollar as yields ticked higher. U.S. bond markets and government offices will be closed later on Tuesday in observance of the Veterans’ Day holiday, while other markets will trade.
The dollar added about 0.3 percent on the day to 115.18 yen JPY=, moving back toward Friday’s seven-year peak of 115.60.
The euro was steady on the day at $1.2424 EUR=, holding above a two-year trough of $1.2358 touched on Friday, but strategists said the single currency remained vulnerable.
“Our global flows data showed selling by both hedge funds and real money accounts post ECB in near record amounts. With both sectors not yet approaching oversold territory, there should be further room for continued selling,” Citigroup’s foreign exchange strategist Todd Elmer said in a note.
Investors had locked in gains on long dollar positions as Treasuries rose after headline U.S. payroll figures on Friday fell short of high expectations. The report still provided evidence of solid improvement in employment conditions, and underscored the brighter U.S. economic picture compared with Europe and Japan.
The Federal Reserve’s monthly labor market conditions index released Monday showed an unchanged 4.0 level for October, which also allayed some concerns.
Diverging monetary policy outlooks between the Fed and both the European Central Bank as well as the Bank of Japan have lifted the dollar against its major rivals in recent weeks.
Spot gold XAU= was slightly higher at $1,151.25 an ounce after the previous session’s 2Â percent slide.