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Asia: Markets rise with commodities but crude toils

Wednesday, January 11, 2017 - 11:40

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[HONG KONG] Asian markets rose on Wednesday with commodities-linked firms boosted by China's strong inflation reading but oil prices struggled after two days of sharp losses fuelled by worries over Opec's plans to cut output.

But despite gains across the region, investors are on edge as they await Donald Trump's first press conference since his US election win, with initial excitement about his plans now turning to scepticism about whether he can deliver.

China on Tuesday said factory-gate prices surged last month at their fastest pace in more than five years, leading to hopes the country could export much-needed inflation around the world and help kickstart global growth.

The news helped ramp up prices in key commodities such as iron ore, copper and aluminium, which in turn provided support to producers.

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Sydney-listed BHP Billiton was up more than three percent while rival Rio Tinto gained more than four percent, while in Tokyo Sumitomo Metal Mining also put on more than three percent.

In China there were gains of up to nine percent in some commodity firms.

"Given China is the world's exporter, changes in their prices are important," James Woods, global investment analyst in Sydney at Rivkin Securities, told Bloomberg News.

Hong Kong stocks rose 0.7 per cent and Sydney gained 0.4 per cent, while Tokyo ended the morning 0.4 per cent higher.

Shanghai was flat, Seoul put on one per cent and Singapore added 0.2 per cent. There were also healthy gains from Wellington to Kuala Lumpur.

However, on oil markets both main contracts were only marginally higher, having tanked almost six per cent in the past two session as dealer fret over Opec's production deal.

News that more US rigs had come online was followed by news Iraq had pumped record amounts in December and that it planned to produce more in February. That has raised questions about the chances of success for November's Opec output cut agreement.

Eyes now turn to Mr Trump's news conference, which will be followed for his outlook for his presidency with little over a week until he is sworn into office.

Markets and the dollar surged after his election as traders bet his plans for high infrastructure spending, low taxes and deregulation will fan growth and lead to higher inflation, forcing the Federal Reserve to hike borrowing costs.

But Stephen Innes, senior trader at OANDA, said in a note: "Traders will be viewing the speech with a high level of scrutiny (after) the market's exhilaration over 'Trumpenomics'.

"Initially, euphoria gave way to a more calculated approach to the (dollar) as we entered year end, and that has now morphed into a degree scepticism over the proposed US infrastructure spend."

AFP

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