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Asia: Stocks jump amid US dollar drop as drugmakers gain; oil soars

Thursday, April 7, 2016 - 09:58

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[WELLINGTON] Asian stocks climbed, while the US dollar extended losses, after Federal Reserve meeting minutes reaffirmed that US policy makers aren't in a rush to raise interest rates and as the recovery in crude oil prices solidified.

Health-care shares drove the advance in Asia, tracking US pharmaceutical company gains after Pfizer Inc's scuppered deal with Allergan Plc spurred merger speculation in the industry. Japanese shares reversed earlier losses to rise for the first time in three days, even as the yen held near a 1 1/2-year high, set for its longest rally since January.

The Korean won and Malaysian ringgit climbed. 

Crude rose above US$38 a barrel after jumping 5.2 per cent last session as American oil supplies unexpectedly fell from an 86-year high.

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Market voices on:

While they discussed the relative health of the American economy at their March meeting, Fed officials contrasted it to the persistent risks facing the global outlook.

Traders are assigning zero chance of the Fed increasing rates in April, with the odds not topping 50 per cent until its meeting in December. That sort of outlook is bad for the US dollar, with the yen the biggest beneficiary this month among major currencies.

Also burnishing market sentiment is oil's return to gains, with the US stockpiles drop easing concern over the global glut and optimism over a deal between producers to freeze production returning.

"The minutes from the meeting echoed the recent dovish comments by Janet Yellen," James Woods, a global investment analyst at Rivkin Securities in Sydney said in an e-mail to clients.

"This is an important moment for the Federal Reserve as it highlights a change in weight given to global growth. While signs of inflation are picking up, to me it makes sense the FOMC would rather exceed their 2 per cent inflation target than risk pushing the US economy back into recession," he said, referring to the Fed Open Market Committee.

Taiwan updates on consumer prices Thursday, while updates on foreign reserves are due from China, Australia, Malaysia, Indonesia and the Philippines.

Stocks

The MSCI Asia Pacific Index gained 0.6 per cent as of 10:10 am Tokyo time, with health-care stocks jumping 1.3 per cent, led by Korea's Celltrion Inc and Japan-listed Astellas Pharma Inc. Pfizer, the biggest US drugmaker, increased 5 per cent on Wednesday, while Allergan - the company it wanted to acquire - rose 3.5 per cent.

Japan's Topix index advanced 0.4 per cent as commodity stocks drove the climb.

In Australia, the S&P/ASX 200 Index added 0.5 per cent, while South Korea's Kospi index swung between gains and losses, with Samsung Electronics Co fluctuating after reporting better-than-estimated earnings.

New Zealand's S&P/NZX 50 Index climbed 0.3 per cent, rising a second day.

Futures on the Standard & Poor's 500 Index were little changed early Thursday, following a 1.1 per cent increase in the US benchmark.

Currencies

The yen ticked up 0.3 per cent, rising for a fifth day - its longest run of gains since Jan 8 - to 109.47 per US dollar. The currency touched 109.34 last session, its strongest level since Oct 31, 2014, as the greenback pulled back after the Fed minutes.

The meeting records shed more light on Fed officials' decision to keep rates unchanged last month, after hiking from near zero in December. Records showed US policy makers debated an April rate hike, though several officials advocated a cautious approach, partly amid worries that slowing world growth could crimp the US economy's own expansion.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was down 0.2 per cent after halting a two-recovery Wednesday. The won added 0.2 per cent in its first advance since Monday, while oil's rally bolstered the ringgit, helping it up 0.9 per cent.

Australia's dollar also strengthened, rising 0.3 per cent.

Commodities

West Texas Intermediate crude added 1.3 per cent to US$38.23 a barrel following last session's jump, which was its steepest one-day gain since March 16. Brent also climbed one per cent to US$40.22.

American crude supplies fell 4.94 million barrels last week, data from the US Energy Information Administration showed, after analysts predicted a 2.85 million-barrel gain. Refineries processed the most oil in three months as output and imports slipped. Diesel led gains after the report showed stockpiles of distillate fuel, which includes diesel and heating oil, tumbled on the East Coast.

Gold for immediate delivery attempted a rebound, rising 0.3 per cent to US$1,2525.63 an ounce following Wednesday's 0.7 per cent retreat.

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