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Asia: Stocks up with copper before China data; oil extends gains

Wednesday, July 15, 2015 - 09:19
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[WELLINGTON] Asian stocks climbed ahead of Chinese economic data, with the regional index set for its longest run of gains since April amid a rebound in global equities. Oil advanced with copper, while the dollar held declines.

The MSCI Asia Pacific Index rose 0.3 per cent by 10 am in Tokyo, set for its highest close since July 3 as stock gauges from Japan to Korea gained at least 0.2 per cent. US index futures were little changed after the longest equity rally there since January. Oil rose a second day on speculation the nuclear deal won't spur a rush of Iranian crude exports. Copper added 0.3 per cent, while wheat extended losses. The Bloomberg Dollar Spot Index held on to Tuesday's 0.2 per cent retreat.

Chinese gross domestic product data is projected to paint a muted picture for the second quarter. Reports on retail sales and factory output also due Wednesday amid signs authorities have halted the equity rout, for now. Federal Reserve Chair Janet Yellen addresses Congress with traders paring bets on interest-rate increases after an unexpected drop in retail sales. The Bank of Japan also reviews monetary policy.

"Any surprises in China's data dump will help provide some direction," wrote Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand Ltd, in an e-mail to clients. Ms Yellen will probably "reiterate her view that a 2015 rate hike looks likely and give away not much else. Ms Yellen's poker face has come a long way."

MSCI's All-Country World Index climbed a fifth day, adding 0.1 per cent in early trading. Stocks have been rallying as concern over the twin crises in China and Greece eased, with authorities in Beijing appearing to halt the selloff and the Greek prime minister accepting bailout terms. The Standard & Poor's 500 Index capped a four-day jump last session.

Japan Markets In Japan, the Topix index rose a fourth day, climbing 0.2 per cent amid gains in mining stocks and drugmakers. The yen was little changed for a second day, trading at 123.32 per dollar ahead of the BOJ review. Of 35 economists surveyed by Bloomberg earlier this month, 13 don't expect further expansion of Japanese monetary stimulus. Twelve project more easing at the bank's October meeting, down from 14 last month.

Oil's rebound from a drop of as much as 2.5 per cent last session aided gains in Australia, with the S&P/ASX 200 index up 0.8 per cent, led by energy producers and consumer stocks. The Kospi index in Seoul added 0.9 per cent.

Iran Deal West Texas Intermediate crude climbed 0.3 per cent to US$53.22 a barrel, while Brent also gained 0.3 per cent to US$58.67 per barrel.

The accord forged Tuesday promises to end a 12-year standoff over Iran's nuclear activities that has at times drawn threats of military action from the US as well as from Israel, which has indicated it will lobby American lawmakers to reject the deal.

"Iran will not be increasing production for some time," Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said by phone. "There is also the question of how much pressure Israel is going to put on the US Senate in terms of the ramifications of the deal." Iran will be able to add 300,000 barrels to 500,000 barrels a day to the market within six to 12 months, according to Richard Nephew, a former sanctions official at the US State Department. American oil inventories probably declined last week, a Bloomberg survey showed before an Energy Information Administration report due Wednesday.

Rate Bets Treasuries rose after the US retail sales data, with yields on 10-year notes little changed at 2.40 per cent after slipping five basis points last session. Australian bonds due in a decade followed the move, with rates down three basis points to 2.30 per cent.

The surprise decline in the June sales number may push economists to lower second-quarter growth forecasts as consumer spending accounts for about 70 percent of the economy.

The probability of the Fed raising rates at its September meeting slipped to 27 per cent, down from 35 per cent on Monday, futures data compiled by Bloomberg showed. For December, the odds of a hike fell to 63 per cent from 69 per cent. Fed officials in June forecast the central bank would raise borrowing costs twice this year.

China A50 Index futures traded in Singapore lost 0.3 per cent in recent trading, while contracts on China's CSI 300 Index were down 3.6 per cent.

The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the US rose a fourth day, adding 0.4 per cent on Tuesday. Both the Shanghai Composite Index and the Hang Seng China Enterprises Index, which tracks Chinese shares listed in Hong Kong, fell Tuesday following a three-day rebound.

China's economy grew 6.8 per cent last quarter, the least since 2009, according to the median of economists' estimates compiled by Bloomberg. That would mark the first reading below 7 per cent since the global financial crisis. China's market regulator announced more restrictions on stock trading Tuesday "Whether or not the 'stability measures' were meant to filter into the economy or not is a side issue but the likelihood they have is high," Evan Lucas, a markets strategist in Melbourne at IG Ltd., wrote in an e-mail.

Copper climbed to US$5,589.50 a metric ton in London, paring back some of Tuesday's declines ahead of the Chinese data. Zinc rose 0.6 per cent, advancing a sixth day, with China the world's biggest consumer of industrial metals.

Wheat futures for September delivery dropped 0.7 per cent, while soybeans lost 0.4 per cent. Corn rallied 0.2 per cent after sliding the most in 15 weeks on Tuesday on speculation warm weather in the US will boost crops.

BLOOMBERG