Asia: Markets rally with Wall St after oil shock

[HONG KONG] Tokyo led a recovery in Asian stock markets Tuesday, soaring more than three per cent as dealers built on a strong lead from Wall Street and disappointment over failed oil talks gave way to hope for the global economy.

While Asia ended lower Monday following the collapse of the weekend meeting to cap crude production, initial sharp losses in Europe and New York turned to gains as dealers were lifted by positive comments on the US outlook and recent upbeat data out of China.

Federal Reserve Bank of Boston President Eric Rosengren said Monday that the world's number one economy was much healthier than financial markets thought and saw growth picking up through this year.

"While there have been significant headwinds from abroad, and market turbulence related to those headwinds, I view the US economy as fundamentally sound and likely to perform better than the domestic economies of most trading partners," he said.

Also, New York Fed President William Dudley said he foresaw inflation picking up as the economy improves.

The comments soothed concerns and helped fuel buying after early shocks caused by the Doha oil failure.

"Markets reversed much of the post Doha price action in energy and currencies," analysts at Australia & New Zealand Banking Group, including Sydney-based Jo Masters, wrote in a report.

"Sentiment was also supported by positive comments on the US and European outlook by the Fed's Dudley and improved US corporate earnings," they said, according to Bloomberg News.

Gains in New York and Europe were followed by similar gains in Asia. Tokyo ended the morning session 3.5 per cent higher.

The Nikkei had lost more than three per cent Monday as a dive in oil prices compounded the impact of two earthquakes last week that has led to some of the country's biggest firms including Toyota shutting down factories.

Hong Kong added 0.7 per cent, Shanghai 0.5 per cent, Sydney gained one per cent and Seoul was 0.1 per cent up.

World markets were already enjoying buying last week following a series of upbeat readings from China - including on trade, investment and factory activity - suggested a long-running growth slowdown in the country may be bottoming out.

A more confident mood provided support to higher-yielding, or riskier, currencies, pushing the Australian dollar 0.8 per cent higher against its US counterpart and the South Korean won 0.7 per cent up. The Indonesian rupiah added 0.1 per cent and Canadian dollar almost one per cent.

The greenback also edged up against the yen - which is the go-to unit in times of trouble. It bought 109.09 yen in Tokyo Tuesday, well up from the levels below 108 yen seen early Monday.

However, while oil prices pared most of its early losses by the end of Monday, the commodity is still facing selling owing to supply glut woes and in early Tuesday exchanges Brent was 0.4 per cent down while West Texas Intermediate shed 0.3 per cent.

REUTERS