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Oil rally powers on as Asian index futures climb after payrolls

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[WELLINGTON] Crude oil extended gains into a fourth day as Canada's wildfires crimp production out of the nation's main energy hub, while Asian index futures foreshadowed advances, with US payrolls data failing to bolster prospects of a June interest-rate hike from the Federal Reserve.

Brent and West Texas Intermediate crude jumped more than 2 per cent as Monday trading got under way, while copper futures dropped amid evidence imports into China, the world's top industrial metals consumer, slumped last month from a record high. Futures on stock gauges in Australia and Hong Kong rallied with US stocks at the end of last week, and Japanese contracts signaled gains in Osaka and Chicago. Gold retreated.

"There is plenty of news for market participants to digest," Chris Weston, chief markets strategist in Melbourne at IG Ltd, said in an e-mail to clients.

"Asia-based traders will have their chance to react to the below-par payrolls data, so one should watch the dollar intently. The market is still highly skeptical around future hikes, with the next interest-rate hike not fully priced in until June 2017."

The fires that raging through Canada's Alberta province have spread toward the oil-sands facilities north of Fort McMurray, knocking out an estimated 1 million barrels of production at a time when crude traders are fretting about a global supply glut.

Investors trimmed bets on the Fed raising benchmark rates next month after nonfarm payrolls rose by 160,000 workers, below what economists had anticipated, while the jobless rate held at 5 per cent. Meanwhile, trade and foreign-currency reserves data at the weekend provided evidence of stability in China's slowing economy.

Stocks

New Zealand's S&P/NZX 50 Index, the first major stock index to start trading each day, slipped 0.3 per cent as of 8:28 am Tokyo time, snapping a two-day advance. Futures on the S&P 500 Index climbed 0.2 per cent following a late-in-the-day rally in US equities Friday, with the US benchmark driven up 0.3 per cent by advances in mining and technology shares.

Futures on Australia's S&P/ASX 200 Index added 0.4 per cent in most recent trading, with markets in South Korea, Indonesia and Thailand to resume Monday following two-day breaks.

Contracts on the Hang Seng Index in Hong Kong climbed 0.4 per cent at the end of last week, while those on the Hang Seng China Enterprises Index advanced 0.6 per cent. FTSE China A50 Index futures climbed less than 0.1 per cent late on Friday.

Nikkei 225 Stock Average futures were bid for 16,150 in the Osaka pre-market, from 16,080 at their close on Friday, while yen-denominated contracts on the Japanese index added 0.4 per cent early Monday to 16,150.

The probability of the Fed hiking borrowing costs at its meeting next month fell to 8 per cent after the jobs data, from 12 per cent a week earlier.

The US dollar's reaction to the jobs report was muted by comments from Fed Bank of New York President William Dudley. While the data was "a touch softer, maybe, than what people were expecting," Mr Dudley said he wouldn't put a lot of weight on it and that two rate hikes were still a reasonable expectation for 2016. The Fed reduced its outlook for rate increases this year to two from four in March.

The odds "seem too low for a 'live' meeting, but it highlights the huge difficulty facing the Fed," Con Williams, a rural economist in Wellington at ANZ Bank New Zealand Ltd, said in an e-mail to clients.

"Data releases apart, for a central bank that prides itself on nurturing market expectations, it has a mountain to climb to raise rates in June if it deems that appropriate."

Minutes of the Bank of Japan's March meeting are due Monday, along with data on Japanese earnings and Australian job advertisements. Taiwan reports on trade, while Thailand and Singapore issue data on foreign reserves. China is scheduled to report on foreign direct investment.

BLOOMBERG