Asia: Shares rally with industrial metals while Aussie declines

[SYDNEY] Asian stocks rebounded ahead of the Thanksgiving holiday in the US as crude oil maintained its gains. Australia's dollar retreated amid a record pullback in business investment.

The Asia-Pacific equity benchmark rallied from a one-week low as shares in PetroChina Co rose for a sixth day after the company said it will sell its stake in a pipeline company. US crude held above US$43 a barrel amid signs of a slowdown in American drilling. The Aussie fell on the biggest ever drop in private capital spending, a data set closely monitored by the Reserve Bank of Australia, while the nation's biggest mining company, BHP Billiton, extended its slump to a 10-year low. Industrial metals rebounded.

Global stocks have rallied from a two-year low reached in September as investors became more comfortable with the idea of higher US borrowing costs. Bets the Federal Reserve will end a seven-year period of near-zero interest rates when it meets next month remain above 70 per cent amid expectations the European Central Bank will go the other way, by expanding its asset purchases. Data on US orders Wednesday rounded out a picture of stabilization in manufacturing, even as consumer spending rose less than forecast.

"US economic data was in line with expectations and provides some comfort," said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo. "Investors expect markets will rise after the US rate hike since uncertainty will be dispelled. They want to buy stocks now."

The MSCI Asia Pacific Index added 0.7 per cent by 11:24 am in Tokyo, after sinking Wednesday to its lowest level since Nov 16. The Topix index in Japan all but erased last session's losses, climbing 0.5 per cent.

Hong Kong's Hang Seng Index advanced 1.1 per cent and the Hang Seng China Enterprises gauge rose 0.9 per cent. Shanghai shares rose 0.4 per cent to a three-month high.

"Global oil prices has recovered slightly, and that has helped certain resource-rich countries,"said Geoffrey Ng, director at Fortress Capital Asset Management Sdn. in Kuala Lumpur. "There has been stronger economic support from the Chinese government, and it hasn't been just support internally but also the leaders have been engaging with countries in the region." Australia's S&P/ASX 200 Index jumped 0.8 per cent after two days of losses. BHP Billiton was an exception, falling to its lowest level since October 2005 after JPMorgan Chase & Co cut its rating on the Sydney-traded stock to underweight, from neutral. Macquarie Group also said BHP's A-level credit rating is at risk, along with that of Rio Tinto Ltd. Rio fell for a fifth straight day.

The S&P/NZX 50 Index in Wellington rose 0.2 per cent, while South Korea's Kospi index was up 1 per cent, led by Samsung Electronics Co.

Standard & Poor's 500 Index futures gained 0.1 per cent after the gauge capped a third daily move of less than 0.2 per cent on Wednesday. The Russell 2000 Index of small-cap equities led gains in the US, where volumes in the S&P 500 were more than 30 per cent below the 30-day average. Brazilian assets were sold off amid the widening of a graft probe there.

Thailand also reports on car sales Thursday and Hong Kong issues data on trade. An update on Indonesian money supply is due.

Currencies The Aussie weakened a second day, slipping 0.3 per cent to 72.30 US cents. The government reported a 9.2 per cent drop in third-quarter business investment, the steepest decline in data going back to 1989, according to calculations by Bloomberg. The RBA has cut key rates to a record 2 percent in its bid to ignite an economy hobbled by the slowdown in China.

The euro was little changed at US$1.0617 after touching its weakest level in seven months Wednesday amid mounting speculation over the outlook for ECB stimulus. Euro-area policy makers meet Dec 3.

"We expect the ECB will cut the deposit rate by more than the market expects next week," said Mansoor Mohi-uddin, senior markets strategist at Royal Bank of Scotland Group in Singapore. "This should keep the euro a sell on rallies into the meeting and allow the euro to test US$1.05 if the ECB meets our expectations." Commodities West Texas Intermediate oil climbed 0.3 per cent to US$43.16 a barrel, bringing its advance this week to 6.6 per cent.

While US data Wednesday showed an increase in oil stockpiles, a report from Baker Hughes Inc. indicated the number of active oil rigs fell to 555, the least in five years. Crude has slumped 19 per cent this year amid concern the world's biggest producers are unwilling to act to abate a global surplus.

Tensions between Russia and Turkey continued to simmer Wednesday, with Russian state media suggesting the downing of its country's warplane near Turkey's border with Syria constituted grounds for war.

While President Vladimir Putin has ruled out any military retaliation against Turkey, a NATO member, the US and Germany have stepped up their calls for an easing in the scuffle. Turkish President Recep Tayyip Erdogan maintained the Russian jet was shot down after failing to heed warnings and crossing into his nation's airspace, while emphasizing he didn't want the issue to be escalated.

Industrial metals gained, with nickel climbing for the third day to its highest level in a week, as Chinese smelters mull production cuts to support prices amid weak demand in the world's biggest consumer. Nickel, used for stainless steel, gained as much as 3.3 per cent to US$9,205 a metric ton on the London Metal Exchange, rallying from near its lowest price in more than a decade. Copper rose 1.8 per cent after slipping 1.3 per cent last session.

BLOOMBERG