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Asia: Stocks rise on oil deal, US dollar gains as bond rout deepens

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[WELLINGTON] Asian equities rallied as a deal to cut global oil output fuelled gains in energy shares, while evidence of strength in the US economy sank bonds and supported the US dollar.

Commodity stocks extended their global surge, driving gains in Australia and Japan after the Opec-led pact to reduce oil production for the first time in eight years sent US crude to just below US$50 a barrel.

Japanese exporter stocks also got a boost after better-than-expected private US jobs data sent the US dollar back to a nine-month high against the yen. South Korea's won led losses in Asia. Yields on benchmark debt in Australia and Japan jumped after a slump in Treasuries, which had their worst month since 2009 in November.

The oil deal, which until Wednesday's meeting had looked to be in peril, brought an element of stability to financial markets whipsawed in November by Donald Trump's unexpected election as US president and the turnaround in sentiment amid his spending plans.

American crude nudging US$50 a barrel provides further support for the so-called reflation trades, with the US dollar close to a decade high on the conviction conditions are ripe for an interest-rate hike from the Federal Reserve this month.

Friday's US payrolls data is the next focal point, with the ADP Research Institute raising expectations with the biggest increase in workers since June, 46,000 more than was forecast.

"The reflation trade continues to work in earnest, this time Trump has taken a back seat and Opec and Russia have taken the initiative and lit the fuse under the oil price," Chris Weston, chief markets strategist in IG Ltd in Melbourne, said in an e-mail to clients.

"We have once again seen that the dollar is the place to be."

A slew of manufacturing purchasing managers' indexes are due Thursday, including official and private gauges for China, Asia's largest economy. Japan reports on company profits and updates on consumer prices are due for South Korea, Thailand and Indonesia.

Stocks

The MSCI Asia Pacific Index added 0.4 per cent as of 9:21am Tokyo time, ending a two-day decline as a sub-gauge of energy stocks jumped 2.4 per cent.

Japan's Topix index returned to its highest level since January, rallying 1.3 per cent.

Australia's S&P/ASX 200 Index jumped 0.6 per cent, snapping a three-day drop as New Zealand's S&P/NZX 50 Index climbed 0.3 per cent, while the Kospi in Seoul was little changed.

Futures on the S&P 500 Index were little changed at 2,198.25, after the underlying benchmark slipped 0.3 per cent Wednesday, trimming its November gain to 3.4 per cent, still the best monthly performance since July.

Currencies

The yen was steady at 114.43 per US dollar after sliding 1.9 per cent last session and touching its weakest point since March 10.

Bloomberg's Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after advancing 0.5 per cent Wednesday, leaving it up 3.9 per cent in November, the most since Sept 2014.

The won slid 0.7 per cent after commodity-linked currencies led gains last session.

Bonds

Yields on Australian bonds due in a decade rose for a third day, climbing eight basis points, or 0.08 percentage point, to 2.80 per cent.

Similar maturity New Zealand debt yielded 3.24 per cent, up nine basis points, while rates on Japanese notes gained one basis point to 0.038 per cent.   Ten-year Treasury notes yielded 2.39 per cent, up another basis point after surging nine basis points Wednesday to their highest close since July last year.

Private payrolls in the US climbed by 216,000 this month, after a 119,000 gain in October that was revised lower, data from the Roseland, New Jersey-based ADP showed Wednesday. The median estimate of economists surveyed by Bloomberg was for an increase of 170,000 jobs.

Economists are predicting an 180,000-worker increase in nonfarm payrolls in Friday's data, after they climbed by 161,000 in October.

Commodities

West Texas Intermediate crude slipped 0.4 per cent to US$49.24 a barrel early Thursday after surging 9.3 per cent last session, the biggest one-day gain since Feb 12.

The Opec-led deal was broader than many people had expected, given that it extended beyond the bloc with Russia agreeing to unprecedented cuts to its own output.

The gain erased oil's monthly loss, leaving futures up 5.5 per cent in November.

Gold was steady at US$1,173.77 an ounce in the spot market, after sliding 1.3 per cent last session to its lowest level since February.

BLOOMBERG