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Asian stocks firm after robust US jobs data

Asian stocks stood firm and the dollar notched fresh seven-year highs against the yen on Monday after much stronger-than-expected jobs data underlined the strength of the US economy.

MSCI’s broadest index of Asia-Pacific shares outside Japan was unchanged. Australian shares gained 0.8%.

Tokyo’s Nikkei rose 0.3%, poking above 18,000 for the first time since July 2007.

Data on Friday showed US non-farm payrolls in November surged by 321,000, easily topping forecasts for 230,000 new jobs.

The Dow and S&P closed at record highs in light of the robust employment numbers, although the gains were modest with increasing signs of economic strength seen drawing the Federal Reserve closer to hiking rates.

The dollar was steady at 121.520 yen after touching a new seven-year high of 121.860. The dollar index hovered near a 5-1/2 year high of 89.467.

A bullish dollar worked against crude oil, with the stronger greenback making commodities denominated in the US currency less affordable for holders of other currencies.

US crude was down $ 1.03 at $ 64.81 a barrel, heading towards a five-year low of $ 63.72 struck a week ago, with a strong US jobs report doing little to lift the bearish mood.

Some observers focused on the positives of cheaper oil.

“The good news is that the fall in crude oil prices will provide well over two-thirds of the world’s consumers with a windfall gain, particularly, the US, North Asian and Indian consumer. It is of modest help to Europe as well,” Sean Darby, chief global equity strategist at Jefferies, said in a note to clients.

“This windfall gain ought to boost global GDP by around 0.5% for every US$ 20/barrel drop in oil prices (with a lag).”

The dollar stood tall against the euro, which languished near a two-year low of $ 1.2270.

The common currency was also weighed down after Standard & Poors on Friday cut Italy’s sovereign rating to BBB-, just a notch above junk

The euro and yen are expected to remain on the defensive against the dollar indefinitely as the strong US jobs data further contrasted the divergent monetary policy paths of the Fed and its European and Japanese counterparts who are mired in underwhelming easing schemes.

While the Fed is seen to have moved a step nearer to hiking rates, the European Central Bank is under pressure to enhance its stimulus programme while the Bank of Japan remains far from reaching its inflation target.

Germany’s Bundesbank halved its 2015 growth forecast for Europe’s largest economy on Friday and also trimmed its estimate for this year, though its president said there were signs that current weakness would soon be overcome.


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