Asia Up With European Futures as Crude Oil Near $50

Asian stocks rose with European equity index futures and bonds declined after a pickup in U.S. services activity that’s bolstered the case for the Federal Reserve to raise interest rates this year. The yen and gold both declined for an eighth day.

The MSCI Asia Pacific Index climbed to a one-week high as the yen’s retreat gave a lift to Japanese exporters and energy companies rallied following gains in oil prices. The Bloomberg Dollar Spot Index held near a two-week high and Australian bonds dropped after a report showed U.S. services output expanded in September at the fastest pace in almost a year. Crude traded near the highest level since June after American stockpiles dropped, while gold sank to a three-month low.

“Data has been consistent with the Fed moving in December,” said Chris Green, the Auckland-based director of economics and strategy at First NZ Capital Group Ltd. “The rebound in crude oil adds to the positive backdrop for inflation and that could provide a rationale for the rates to move as well. The Fed has a delicate balancing act. They’d want to normalize rates as the economy improves but at the same time they don’t want to scare the financial system.”

The outlook for monetary policies in the world’s biggest economies is dominating investor sentiment this week, with bets on a Fed rate rise in December mounting amid signs that unprecedented stimulus is drawing to an end in Europe and Japan. The European Central Bank’s plans may become clearer on Thursday when the minutes of its last policy meeting are released, while American jobs numbers on Friday will help shape expectations for U.S. borrowing costs before the nation’s earnings season kicks off next week.

Stocks

The MSCI Asia Pacific Index added 0.4 percent as of 7:18 a.m. London time with a measure of energy stocks surging 2 percent, the best performance among 10 industry groups.

“The oil price increase outweighs concerns about a Fed hike at the moment," said Jingyi Pan, a Singapore-based strategist at IG Asia Pte. "For emerging markets, volatility will rise occasionally, as shown yesterday when we had some taper tantrum.”

Japan’s Topix index gained 0.5 percent as Toyota Motor Corp. rallied for a fourth day. Hong Kong’s Hang Seng Index advanced to its highest level in almost four weeks, while markets in China remained closed for a week-long holiday.

Samsung Electronics Co. jumped as much as 5 percent to an all-time high in Seoul. The world’s largest smartphone maker is being urged by activist investor Elliott Management Corp. to restructure its business into two units.

Sompo Holdings Inc. jumped by the most since February in Tokyo after the insurer said it agreed to buy New York-listed Endurance Specialty Holdings Ltd. for about $6.3 billion. Fujitsu Ltd. surged more than 5 percent after the company was reported to be in talks to sell a majority stake in its personal-computer business to Lenovo Group Ltd., which advanced 2.3 percent in Hong Kong.

Futures on the Euro Stoxx 50 Index added 0.3 percent. Shanghai-listed San’An Optoelectronics Co. plans to make a 70 euro per share offer by mid-October for a stake in German lighting business Osram Licht AG, Wirtschaftswoche reported, citing unidentified people familiar with the negotiations.

S&P 500 Index futures were little changed, after the U.S. benchmark gained 0.4 percent in the last session. Shares of Twitter Inc. slid more than 10 percent in extended trading on Wednesday after Recode reported that Alphabet Inc.’s Google isn’t interested in buying the social-networking service.

Currencies

The yen slipped 0.1 percent to 103.63 versus the greenback, extending its longest losing streak since July 2014, and Australia’s dollar was the worst performer among major currencies with a 0.5 percent drop. The Bloomberg Dollar Spot Index climbed to a two-week high after the chance of a Fed rate rise in 2016 climbed to 62 percent in the futures market on Wednesday, from 54 percent a week earlier.

“We’ve seen the implied probability of a Fed hike in December increase in the past week and that has pushed Treasury yields up,” said Chris Weston, chief markets strategist at IG Ltd. in Melbourne. “A continued steepening in the U.S. yield curve would mean the dollar will sustain its upside.”

The yuan was little changed at 6.6976 a dollar in offshore trading, after earlier weakening beyond 6.70 — a level seen as a red line for China’s central bank — for the first time in three weeks.

Bonds

The yield on Australian bonds due in a decade rose four basis points to 2.17 percent, extending this week’s surge to 21 basis points. Similar-maturity U.S. Treasuries fell for a fifth day, lifting their yield to a two-week high of 1.71 percent. A Bloomberg index of developed-market sovereign debt ended Wednesday at the lowest level since July.

“The bearish price action that has been in place since last Friday remains well entrenched, and we see little reason to suggest the move has fully run its course” in Treasuries, Ian Lyngen, a New York-based independent analyst who was voted among the top strategists for 2016 in an Institutional Investor poll in July, wrote in a report. From the ECB, “any nod to the taper potential will surely be bearish” for global bonds and risk assets, he said.

Commodities

Crude oil declined 0.5 percent to $49.60 a barrel in New York, after advancing 2.3 percent to a three-month high on Wednesday. U.S. stockpiles fell below 500 million barrels last week for the first time since January, official data show. The oil rally will stall at $55 a barrel as American shale drillers get back to work, according to Goldman Sachs Group Inc.

“There is a bit of a cap for oil at about $50 because above that level, once we head up toward $55 a barrel, there’s concerns that U.S. shale producers will jump back into action,” said Michael McCarthy, chief market strategist in Sydney at CMC Markets. “The draw in crude stockpiles is clearly one of the factors contributing to the positive momentum.”

Gold fell 0.2 percent, extending its longest losing streak since May. Nickel held near a two-week low in London as investors assess a Philippines mining audit that could prompt shutdowns in the world’s biggest supplier, and news that Indonesia may resume some sales of nickel ore.

Source: Bloomberg