* China Q3 growth quickens to 7.8 pct yr/yr
* Focus turns to Fed after government shutdown
* Asian shares tick up to 5-month peak, Nikkei flat
* Euro hovers near 8-month high vs dollar
By Dominic Lau
TOKYO, Oct 18 Asian shares rose to a five-month
high on Friday as investors took heart from quickening growth in
China a day after the United States sealed an 11th hour deal to
break a confidence-sapping government shutdown.
The U.S. debt drama has also heightened speculation of the
Federal Reserve delaying the start of its stimulus reduction
plan, underpinning riskier assets but keeping the dollar pinned
down to an eight-month low.
MSCI's broadest index of Asia-Pacific shares outside Japan
advanced 0.5 percent to a five-month high,
adding to a 0.6 percent rise in the previous session.
Investors were relieved after data showed China's economy
grew 7.8 percent 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
Still, the reaction across Asia to the data was somewhat
muted by the uncertainty about the outlook for global demand,
underlined by a surprise fall in China's September exports.
China's CSI300 index ticked up 0.3 percent.
"The Q3 GDP figure is in line with market expectations but
the uncertainty is whether the current recovery is sustainable,"
said Shen Jianguang, chief China economist with Mizuho
Securities in Hong Kong.
Overnight, the U.S. Standard & Poor's 500 index
closed at a record high. U.S. S&P E-mini futures added
0.2 percent in Asian trade on Friday, indicating a further rise
when Wall Street opens later in the day.
U.S. Democrats and Republicans reached an 11th-hour
agreement on Wednesday to break an impasse, pulling the world's
largest economy from the brink of an historic debt default as
the deal funds the government until Jan. 15 and raises the
borrowing limit through to Feb. 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
at least until a few months into next year.
A simple estimate suggested the direct and indirect impact
of the shutdown would weigh on the annualised fourth-quarter
gross domestic product growth by 0.4 percentage point, Morgan
In September, the Fed stunned markets by opting to delay
trimming its $85 billion-a-month bond purchases. Stimulus
tapering expectations have now been pushed down to December.
"The U.S. dollar is the worst performing currency as
attention shifts from the U.S. debt debacle to incoming Fed
rhetoric, and bond markets may be leading the way," said
Christopher Vecchio, currency analyst at DailyFX.
"The U.S. Treasury yield curve continues to flatten, which
typically occurs when either slower economic growth is expected
and/or additional monetary easing is forecasted," he added.
Yields on benchmark 10-year U.S. Treasuries hit
a two-week low on Thursday at 2.581 percent. They were quoted at
2.603 percent in the Asian session.
The dollar held steady at 98.065 yen after shedding
0.8 percent against the Japanese currency overnight to log its
biggest one-day percentage drop in a month, while Tokyo's Nikkei
average was flat, underperforming regional markets.
The greenback also lost more than 1 percent against the euro
on Thursday. The dollar was steady near an eight-month
low at $1.36625 to the euro in Asian trade on Friday.
Against a basket of major currencies, the dollar
ticked up 0.1 percent, stabilising after hitting an eight-month
trough on Thursday.
"The Fed's taper decision will ultimately be tied to the
economic data - which have been hard to come by since the
government shutdown," analysts at Barclays Capital said in a
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 Oct.
"The bias now is for the whole Fed cycle to be re-repriced
towards a later exit and slower tightening," analysts at Societe
Generale wrote in a note. "The bias is thus for short-term U.S.
dollar forward rates...to go even lower. This will do the U.S.
dollar no favours in the near term."
Among commodities, gold took a breather after
rallying almost 3 percent overnight - its biggest one-day rise
in a month - as the dollar weakened. It was down 0.1 percent at
about $1,318 an ounce, though not far from a more than one-week
high reached on Thursday.
U.S. crude prices held above $100 a barrel, having
fallen to their lowest level in more than three months in the
previous session as stockpiles in 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.