Australia: Shares rise amid iron-ore surge as Japan futures fall

[WELLINGTON] Asian stocks outside Japan were poised to extend their rally, with a record jump in iron ore fueling gains in Australian mining companies and energy shares buoyed by a surge in crude oil. Commodity-linked currencies retreated with copper.

Australian raw-materials producers rose to their highest level since Nov 6, helping the benchmark index extend its longest rally this year as futures on equity gauges in Hong Kong and South Korea signaled gains.

Japanese futures dropped as the yen maintained its rebound after data showed the economy shrank less than was expected.

The Australian dollar snapped a six-day climb, while US crude traded at US$37.90 a barrel after surging 5.5 per cent last session as Brent broke US$40 a barrel. Copper futures fell 0.5 per cent.

Sentiment in global financial markets has improved over the past three weeks as the sense of turmoil that marked trading at the start of the year starts to ease, amid expectations for further stimulus from key central banks.

Commodities have been boosted by prospects China will boost efforts to right its economy, after leaders at the weekend said they're planning a record-high budget deficit amid expectations growth will be slower in 2016 than last year.

The European Central Bank, which meets this week, is speculated to deliver a package of monetary easing measures to revive the economy.

"Risk on remains the order of the day, at least until the release of China trade data later in the session," Michael McCarthy, chief markets strategist in Sydney at CMC Markets, said in an e-mail to clients.

"Iron ore leapt 19 per cent in overnight trading, copper and oil jumped too. The conundrum for investors is that gold also rallied, suggesting the moves are not just about improved industrial sentiment. It appears short squeezes are contributing to the gains."

Japan's economy contracted an annualized 1.1 per cent last quarter, less than the 1.5 per cent drop projected by economists. China reports on trade Tuesday, with economists predicting an eighth month of declines for exports as the National People's Congress continues in Beijing.

Stocks Australia's S&P/ASX 200 Index gained 0.6 per cent as of 8:53 am Tokyo time, with BHP Billiton Ltd, the world's biggest mining company, up 1.5 per cent.

"The fear of doom has quickly turned into the fear of missing out on a boom," Scott Schuberg, chief executive officer of Rivkin Securities in Sydney, said in an e-mail to clients.

New Zealand's S&P/NZX 50 Index added 0.3 per cent, also climbing for a seventh straight day in its longest rally this year.

Futures on the Hang Seng Index in Hong Kong increased 0.3 per cent with those on the Hang Seng China Enterprises Index in most recent trading, while contracts on the Kospi index in Seoul climbed 0.2 per cent. FTSE China A50 Index futures added 0.8 per cent.

Meanwhile in Japan, Nikkei 225 Stock Average futures were bid for 16,870 in the Osaka pre-market, down from 16,950 at their close Monday, while yen-denominated contracts on the gauge slipped 0.2 per cent in Chicago, extending last session's 0.9 per cent drop. Singapore-traded Nikkei 225 futures fell 0.4 per cent to 16,880.

"Market sentiment is improving, but there's also a sense of deadlock as well, we're not in a state where investors are strongly bullish," Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co in Tokyo, said by phone.

"I expect investors not to buy everything that has been lagging, but to shift toward the energy sector."

Standard & Poor's 500 Index futures were little changed early Tuesday, after the measure ended last session up 0.1 per cent, capping its longest rising streak since October. Energy and mining shares led gains, while technology stocks fell 0.7 per cent as Facebook Inc and Microsoft Corp dropped at least 1.9 per cent.

BLOOMBERG