Asian Stocks UpWith Europe Futures as OPEC Deal Buoys Oil

Asian stocks rallied with European equity index futures as oil held near a three-week high after OPEC members unexpectedly agreed to cut crude output for the first time since 2008.

Energy shares led gains on the MSCI Asia Pacific Index, which was set for its best quarter in more than four years. The ringgit was the best performer among Asian currencies as prospects brightened for Malaysia, Asia’s only major net oil exporter, and the yen slid by the most this month. U.S. crude traded near $47 a barrel, having surged 5.3 percent on Wednesday as the OPEC deal was announced. Sovereign bonds retreated in Germany and across most of Asia amid speculation higher energy prices will revive inflation.

A global oil glut has weighed on crude prices for more than two years, spurring deflation that’s hurt corporate earnings and led to negative bond yields in two of the world’s four biggest economies. The Organization of Petroleum Exporting Countries said its members reached a preliminary agreement to trim production to a range of 32.5 million to 33 million barrels per day following informal talks in Algiers, though the group won’t decide on targets for each country until a November meeting in Vienna.

“The energy sector is going to be a key contributor to the rally we see after the OPEC decision,” said Tony Farnham, a strategist at Patersons Securities Ltd. in Sydney. “All we’ve seen at this stage is the intention to do something, I’d like to see it more concrete and then still they have to abide by it. But, it is the first step.”

Stocks

The MSCI Asia Pacific Index gained 0.4 percent as of 7:12 a.m. Tokyo time, extending this quarter’s advance to about 10 percent. A gauge of energy shares jumped more than 4 percent, the biggest gain in seven months.

“OPEC’s decision to curtail production wasn’t expected, and now crude prices will likely head toward a range of $50 to $60 per barrel from $40 to $50 per barrel, which will ease global deflationary concerns,” said Nobuyuki Fujimoto, a senior market analyst at SBI Securities Co. in Tokyo.

China Oilfield Services Ltd. jumped 11 percent in Hong Kong as PetroChina Co., Asia’s biggest oil and gas producer, rallied by the most since May. Hsin Chong Group Holdings Ltd. plunged by as much as 57 percent as the stock resumed trading after Anonymous Analytics rated the property and construction company a "strong sell."

Futures on the Euro Stoxx 50 Index rose 1.1 percent, as did those on the U.K.’s FTSE 100 Index. S&P 500 Index contracts added 0.1 percent, after the underlying gauge added 0.5 percent on Wednesday as investors weighed the OPEC deal and comments from Federal Reserve officials.

Fed Chair Janet Yellen told lawmakers that the majority of the central bank’s policy-setting group sees an interest-rate increase as likely this year, while Chicago Fed President Charles Evans said an extended period of low borrowing costs will leave less room to navigate future economic shocks. Yellen is scheduled to speak again on Thursday, as are regional Fed chiefs for Atlanta, Minneapolis and Philadelphia.

Currencies

The ringgit strengthened 0.5 percent versus the dollar, leading gains among the currencies of oil-exporting nations. Canada’s dollar was steady following a 0.9 percent advance on Wednesday and the Norwegian krone built on the last session’s 1 percent jump.

Mexico’s peso held near a two-week high before a monetary policy review on Thursday, with most economists predicting interest rates will be raised. Taiwan also has a central bank meeting and its currency strengthened 0.3 percent from Monday’s close as trading resumed following a hurricane. Just over half of the economists in a Bloomberg survey forecast the island’s borrowing costs will be left unchanged, while the remainder were looking for a cut.

The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, rose 0.1 percent from its lowest close in more than two weeks. The yen slid 1 percent, the biggest loss among major currencies, as investors favored higher-yielding assets outside of Japan.

Commodities

Crude oil was up 0.2 percent at $47.13 a barrel, after jumping on Wednesday by the most since April. The lower end of OPEC’s new production target equates to a nearly 750,000 barrels-a-day drop from what the group said it pumped in August. Saudi Arabia and Iran had signaled before the meeting that an agreement was unlikely in Algiers, while all but two of 23 analysts surveyed by Bloomberg predicted there would be no deal.

“The cut is clearly bullish,” said Mike Wittner, head of oil-market research at Societe Generale SA in New York. “The number of actual barrels that will be taken off the market is unclear. What’s much more important is that the Saudis appear to be returning to a period of market management.”

Tin gained 0.7 percent to trade just shy of $20,000 a metric ton, a level last seen in early 2015. The metal used for solder in electronics has jumped 17 percent this quarter, the best performance on the London Metal Exchange, as warehouse stockpiles fell to the lowest since 2008.

Copper and lead rose by at least 0.7 percent, with the latter climbing to its highest since May last year. The LME index of six industrial metals is heading for a third successive quarterly gain for the first time since 2011 helped by an improving economy in China, the biggest consumer. Gold added 0.1 percent, buoyed by recent declines in the dollar.

Bonds

Benchmark 10-year bonds in New Zealand fell for the first time in seven days, while notes in Australia and Singapore dropped by the most in two weeks. The yield on similar-maturity U.S. Treasuries rose by one basis point to 1.58 percent and that for German bunds increased by two basis points to minus 0.125 percent.

“The rise in Treasury yields after the OPEC news was contained because the decision to really cut production won’t be finalized until November,” said Shinichiro Kadota, a foreign-exchange strategist at Barclays Plc in Tokyo. “The Fed’s rate-increase path isn’t gaining momentum, making it unlikely for yields to extend their climb.”

Japan’s 10-year yield rose to minus 0.085 percent from a one-month low of minus 0.09 percent.

Source: Bloomberg