[WELLINGTON] Australian stocks rallied and futures on equity indexes outside of China signaled gains after a rebound in oil at the end of last week spearheaded a revival in risk appetite. The yen continued to decline with the euro as bonds in the region fell with gold.
Takeover activity fueled the steepest advance in New Zealand's benchmark in a year, while Australian shares rebounded from a 2 1/2-year low, with US index futures also jumping amid market holidays in North America.
Contracts on Japanese stocks foreshadowed gains after equities there suffered their worst week in more than seven years.
Markets in mainland China resume Monday after a week-long holiday, during which the yuan soared to a 2016 high in offshore trading.
The yen weakened a second day with the euroas Australian and New Zealand government bonds tracked losses in Treasuries.
US crude fell to around US$29 a barrel after its Friday surge burnished market sentiment.
People's Bank of China (PBOC) governor Zhou Xiaochuan tried to front foot the expected gyrations in local markets by talking up the nation's stability in an interview at the weekend, saying there was no basis for continued depreciation in the yuan.
Global equities entered a bear market last week and demand for haven assets jumped as the Federal Reserve acknowledged the worldwide volatility and signaled it may delay further policy tightening in the US.
After sliding for six straight days on glut concerns, crude futures surged 12 per cent Friday amid a rebound American stocks on strong US retail sales data.
"It is difficult to be sure these days given the extent of volatility present, but one of the catalysts for the better tone to financial markets on Friday appeared to have been some respectable economic data out of the US," Philip Borkin, senior economist in Auckland at ANZ Bank New Zealand Ltd, said in a client note.
"This is important, as together with concerns over China's outlook and emerging markets more generally, recent US data wobbles had added to financial market angst."
While China, Taiwan and Vietnam return from their Lunar New Year breaks Monday, markets in the US and Canada will be closed for holidays.
Japan reported a weaker-than-expected drop in fourth-quarter gross domestic product Monday, with Thailand also slated to update on its economy.
China resumes to a slew of trade numbers, with economists projecting a seventh straight month of contraction in exports. Indonesia also reports on trade, Singapore issues retail sales figures and India will update on wholesale prices.
Stocks Australia's S&P/ASX 200 Index advanced 1.1 per cent as of 8:52 am Tokyo time, as mining and energy stocks drove the rebound.
New Zealand's S&P/NZX 50 Index climbed 1.6 per cent, driven by gains of at least 26 per cent in Diligent Corp and Nuplex Industries Ltd. Diligent agreed to be bought out and chemical company Nuplex received a conditional takeover offer.
Futures on Japan's Nikkei 225 stock average were bid for 15,420 in the Osaka pre-market, up 4.2 per cent from what they closed at on Friday, while yen-denominated contracts gained 0.5 per cent to 15,485 in Chicago. The Nikkei 225 slumped 11 per cent last week, its worst week since October 2008, as a gauge of Japanese equity volatility jumped 35 per cent to an almost five-year high.
In Hong Kong, futures on the Hang Seng Index added 0.1 per cent in most recent trading, while those on the Hang Seng China Enterprises Index, a measure which tracks mainland companies listed in the city, fell 0.1 per cent.
Stocks in the Shanghai Composite Index were valued at 11.3 times estimated earnings when they last traded Feb 5, above the average valuation of 10.5 times for shares in MSCI's Emerging Markets Index, which slid 3.8 per cent last week to its lowest level in more than two weeks.
"There's been a lot of embedded selling pressure in the A- share market," said George Hoguet, a Boston-based global investment strategist at State Street Global Advisors, which has US$2.4 trillion under management, referring to the domestic Chinese equity market.
"I don't think the market is fully cleared yet."
Futures on the Standard & Poor's 500 Index gained 0.6 per cent to 1,868.75 Monday, while those on the Dow Jones Industrial Average climbed 0.5 percent. The S&P 500 rallied 2 per cent with the Dow on Friday, trimming their weekly losses to less than 1.5 per cent as mining stocks and banking shares led the recovery.
The yen retreated 0.3 per cent to 113.62, after trimming its weekly advance to 3.1 per cent on Friday. It was still the best performance among 16 major currencies tracked by Bloomberg against the dollar.
The euro lost 0.3 per cent to US$1.1222 after slipping 0.6 per cent on Friday, only its third drop in 10 days.
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, rose 0.1 per cent after gaining 0.2 per cent on Friday as more positive sentiment dimmed the appeal of haven currencies like the yen, euro and the Swiss franc. The index has lost 1 per cent this year as the case for further US rate hikes in 2016 dims.
The yuan was little changed early Monday at 6.5125 per dollar in Hong Kong trading, after jumping 0.5 per cent on Friday to cap an offshore advance of 0.9 per cent, its fifth straight weekly climb.
PBOC chief Mr Zhou said China's balance of payments is good and capital outflows are normal, with the exchange rate basically stable against a basket of other currencies, according to an interview published Saturday in Caixin magazine. The comments marked an escalation in verbal support for Chinese markets, with Mr Zhou leaving most of the commentary over the past few months to deputies and the chief economist of the central bank's research department.
Policy makers in Beijing have a tricky task Monday given the offshore yuan's strength against the dollar last week. Boosting the so-called yuan fixing would wipe out much of the benefits afforded by January's depreciation of the currency, while any bias toward weakness after the holiday could spur on global market turmoil.
"They have to take into consideration the big drop in the dollar while they were away," said Nizam Idris, head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd in Singapore.
"But unfortunately for China, they've made it such that the market tends to read the fixing as a signaling tool, and that makes Monday's reference rate very important."
West Texas Intermediate crude fell 1.2 per cent to US$29.10 a barrel in early Monday trading, after paring last week's selloff to 4.7 per cent with the Friday jump. Brent slipped 1.7 per cent to US$32.80 after rising 11 per cent at the end of last week.
US oil explorers idled more rigs last week amid oil's fluctuations and descent below US$30 a barrel. Rigs targeting oil in the US fell by 28 to 439, after more than 1,000 were idled over the past year and a half, Baker Hughes Inc said on its website Friday. The report marked eight straight weeks of declines in the number of working rigs.
Copper futures rose 0.9 per cent to US$2.0470 a pound, while gold for immediate delivery was down 0.4 per cent to US$1,232.83 an ounce in a second day of losses. The precious metal climbed 5.5 per cent last week, its best weekly performance since 2011.