Saturday 10 December 2016

Asia stocks, oil jump as dollar sags after Fed

Published 18/03/2016 | 07:26

China faces pressure to reassure world markets over how it is steering its slowing economy and managing its currency (AP)
China faces pressure to reassure world markets over how it is steering its slowing economy and managing its currency (AP)

Asian shares edged higher on Friday, oil touched a 2016 high and the US dollar weakened as investors turned more positive on riskier assets after the Federal Reserve's cautious stance on further interest rate increases.

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But that optimism looked unlikely to spread to European shares, with financial spreadbetters expecting Britain's FTSE 100 to open little changed, Germany's DAX to start the day as much as 0.1pc lower and France's CAC 40 to begin down about 0.2pc.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.8pc, entering positive territory for the year for the first time. It is up 2.3pc this week, and has surged 10.4pc this month.

The Hang Seng index was up 0.6pc, heading for a weekly rise of 3.6pc. China's Shanghai Composite index and CSI 300 climbed about 1.9pc each, and were set for gains of about 6.4pc for the week.

Chinese home prices rose at their fastest clip in almost two years in February thanks to red-hot demand in big cities. Still, risks of overheating in some places combined with weak growth in smaller cities threaten to put more stress on an already slowing economy.

Japanese shares, however, bucked the trend as the dollar's fall against the yen is seen hurting the country's exporters, with the Nikkei closing down 1.3pc for a weekly decline also of 1.3pc.

The broader gains echoed a recovery on Wall Street, where the S&P 500 Index gained 0.66pc overnight to close at its highest since Dec. 31, led by the materials and energy sectors.

The rallies in commodities and equities were spurred by Wednesday's Fed review when policymakers took a more cautious stance on future US interest rate increases.

"We have got an important week out of the way from a macro data perspective, and not only have we come out of it unscathed, we are seemingly in a stronger place than where we started the week," said Ben Le Brun, market analyst at online brokerage OptionsXpress in Sydney.

"We have heard from central banks in all corners of the globe now and the liquidity party rolls on with the potential for more to come."

The benign rate environment, as well as optimism major producers would reach a deal to freeze output, proved a boon for oil.

OPEC kingpin Saudi Arabia and non-OPEC producers led by Russia will meet on April 17 in the Qatar capital Doha, aiming for the first global supply deal in 15 years.

After surging more than 10pc over the prior two sessions, US oil futures CLC1 advanced to $40.55, the highest level since Dec. 4. They were last trading at $40.25, on track for a 4.6-percent increase for the week, their fifth straight week of gains and longest winning streak in about a year.

Brent crude LCOC1 held close to its three-month high of $41.60 reached in the previous session and again on Friday. It's headed for a 3-percent gain for the week.

Oil's rally has also been aided by a weakening dollar, triggered by the Fed's cautious approach to raising rates.

The dollar's index against a basket of six major currencies .DXY =USD on Friday touched a five-month low of 94.578, before edging up to 94.825.

The euro retreated slightly from the five-week high of $1.1342 it hit on Thursday, last fetching $1.1310.

The yen was trading at 111.48, after climbing to 110.67 to the dollar on Thursday, the highest since October 2014.

The Chinese yuan firmed sharply against the dollar to reach a 2016 high, after the People's Bank of China set the midpoint rate at 6.4628 per dollar prior to market open, compared with the previous fix of 6.4961, the biggest daily rise since November.

The spot market opened at 6.4615 and hit an intraday high of 6.4559, its firmest since late December, before easing to 6.4669, still stronger than the previous close of 6.4755.

Even the British pound, which has been dogged by worries about "Brexit" from the European Union, retreated only 0.2pc to $1.4468 from Thursday's one-month high of $1.4504.

The Australian dollar shot up to $0.7681, its highest since July, helped by a recovery in commodity prices. It was last trading at $0.7654.

Copper CMCU3 advanced to a 4-1/2-month high of $5,126 a tonne, and was last trading up 1pc at $5,118. Silver XAG= too jumped to a 4-1/2-month high of $16.111 per ounce, before falling back slightly to $16.08.

Reuters

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