Asia: Dovish Fed propels equities to monthly surge; oil declines

[HONG KONG] The prospect US borrowing costs will stay put for longer sent Asian stocks toward their best month since October, with Chinese shares in Hong Kong near a bull market. South Korea's won strengthened, while crude oil fell with copper.

Shares in Sydney rose the most in two weeks amid a global rally that has the MSCI All-Country World Index on the brink of erasing its losses for 2016. The won climbed 0.6 per cent, Malaysia's ringgit extended gains at a seven-month high and the Bloomberg Dollar Spot Index headed for its worst month in more than five years after Federal Reserve Chair Janet Yellen reiterated that slackening global growth called for a gradual approach to raising rates. US crude dropped backbelow US$38 a barrel as an increase in American supplies kept stockpiles at their highest level since 1930. Copper and zinc fell.

After stimulus efforts from Japan and Europe failed to arrest a global stock selloff at the start of 2016, the prospect of American rates staying where they are for at least the first half has salvaged the quarter for riskier assets. Chicago Fed President Charles Evans reinforced Ms Yellen's message on Wednesday, signaling the central bank would tolerate above- target inflation for a "brief period" amid threats to American expansion.

"A lot of the recent rebound has been down to the Fed back- tracking on rate hikes," Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about US$7.2 billion, said by phone. "We've seen a big rally but there are still some genuine worries out there. Markets had been overpricing some of the risks, whereas now they're probably underpricing them."

Futures now show no chance of the Fed altering monetary policy at its meeting next month and only 45 per cent odds of a rate increase by November. Private American jobs data came in better than analysts expected last session, boding well for official payrolls figures due Friday.

The MSCI Asia Pacific Index advanced a second day, rising 0.2 per cent as of 12:47 pm Hong Kong time. The gauge is poised for an 8.3 per cent jump in March. Consumer and phone-company shares drove Australia's S&P/ASX 200 Index up 1.3 per cent, while New Zealand's S&P/NZX 50 Index rose 0.6 per cent, climbing for a third day. The Topix index swung between gains and losses in Tokyo.

The Hang Seng China Enterprises Index added as much as 0.8 per cent, extending its rebound from a Feb 12 low to more than 20 per cent, before paring the advance. Futures on the Standard & Poor's 500 Index were down 0.1 per cent following a 0.4 per cent climb for the US benchmark that put it back at levels last seen on Dec. 29.

Thailand reports on trade Thursday and Sri Lanka updates on consumer prices. China will provide figures on its current account balance, with Japanese housing starts also due.

Currencies The ringgit extended its climb into a fourth day, rising 0.3 per cent. Malaysia's currency has jumped 9.4 per cent this quarter, on track for its best such performance since 1973 amid oil's rally from an almost 13-year low. Malaysia is the region's only major net exporter of oil.

The South Korean won added 0.6 per cent. Bloomberg's dollar gauge, which tracks the greenback against 10 major peers, rose 0.1 per cent following a three-day slide. The index has lost 3.7 per cent this month, its steepest drop since September 2010.

"The dollar is overvalued, particularly against the major currencies, euro and yen," said Steven Saywell, BNP Paribas SA's global head of foreign-exchange strategy in London, in an interview on Bloomberg TV.

The yen, regarded as a haven investment along with gold and government debt, gained for a third day to 112.21 per dollar. After the ringgit, Japan's currency is the best performer in Asia this quarter, with volatility at the start of the year burnishing its appeal.

The offshore yuan traded in Hong Kong was set for its strongest quarterly performance since 2011, rising 1.46 per cent against the dollar as China's leaders intensified efforts to boost sentiment. The Shanghai rate advanced 0.42 per cent, the first gain in four quarters.

West Texas Intermediate crude declined 1.3 per cent to US$37.83 a barrel, dropping for the fifth time in six days as the increase in US stockpiles reinforced concern over a global glut in the commodity. Brent lost 1.1 per cent to US$38.84, on track for a second straight monthly advance and its first quarterly climb since the second three months of 2015.

Inventories expanded for a seventh week to 534.8 million barrels, according to a report from the Energy Information Administration Wednesday, while imports and production dropped. Ecuador and Venezuela will support a cut to output at a meeting between major exporters in Doha next month, Ecuador's Oil Minister Carlos Pareja said in a post on the ministry's Twitter account.

Gold for immediate delivery added 0.4 per cent to US$1,229.27 an ounce, after sliding 1.4 per cent last session, while copper declined with zinc, losing at least 0.5 per cent in London trading.

BLOOMBERG