Asia: Shares jump with won after US payrolls boost; oil falls

[HONG KONG] Asian stocksjumped the most since March and South Korea's won surged after a bigger-than-expected pickup in US hiring damped concern the world's biggest economy is losing momentum. Gold rose, while oil declined.

The MSCI Asia Pacific Index rose to a one-month high. Japanese shares surged the most in four months and the yen fell for the first time in a week after Prime Minister Shinzo Abe's ruling coalition won an election, a show of support for his stimulus policies. The won strengthened by the most in three weeks, while gold and silver were near two-year highs. Crude dropped toward US$45 a barrel after a report showed American producers are activating more rigs.

The S&P 500 Index flirted with a record close on Friday as a 287,000-worker increase in nonfarm payrolls indicated the US economy was on a stronger footing than the previous month's figure had conveyed. The data led to a modest pickup in expectations for the Federal Reserve to raise interest rates this year and helped stabilise investor confidence after the UK's June 23 vote to leave the European Union triggered wild price swings in financial markets.

"Markets have not moved the dial on expectations of a Fed rate hike to any material extent," Ric Spooner, chief market analyst in Sydney at CMC Markets, said in an e-mail to clients.

"The consensus view is that the Fed will be kept cautious by ongoing global weakness with the Brexit blow to confidence likely to begin showing up in economic data over the next couple of months."

China's consumer prices gained last month at the slowest pace since January, while factory-gate deflation continued to ease, data showed Sunday. Japan reported a decline in machinery orders on Monday, bolstering the case for more stimulus in Asia's second-biggest economy. Euro-area finance ministers are due to hold talks in Brussels and Alcoa Inc is scheduled to kick off the second-quarter earnings season in the US.

Stocks

The MSCI Asia Pacific Index climbed 2.2 per cent as of 11am Tokyo time, with Japan's Topix index surging 3.4 per cent in Tokyo. Futures on the S&P 500 rose 0.1 per cent after the benchmark ended Friday up 1.5 per cent, after briefly rising above 2,130.82, its all-time closing high set in May last year.

"US shares reflected the positive outcome from the payrolls report, and Japanese shares will continue that flow," said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Center.

"Abe said he'll continue to put together his economic-policy package, so that optimism is going to continue to support Japanese shares." Nintendo Co soared 25 per cent in Tokyo, the stock's daily limit, as its new Pokemon Go game tops smartphone app rankings.

Hong Kong's Hang Seng Index rose by the most this month and the Shanghai Composite Index built on its first back-to-back weekly gains since April following the weekend inflation data out of China. The Jakarta Composite Index climbed 1.5 per cent as Indonesian markets resumed trading after a week-long holiday.

Currencies

The yen slipped 0.2 per cent to 100.71 per US dollar, after posting a weekly gain of 1.9 per cent. A win for Mr Abe's ruling coalition in upper-house elections at the weekend will help the premier press ahead with stimulus after he pledged to take "broad, bold" measures to support the economy at the beginning of last month.

The Korean won was the biggest gainer in Asia, strengthening 1.1 per cent as the Malaysian ringgit climbed one per cent.

The Australian dollar dropped 0.2 per cent to 75.53 US cents, following a 1.2 per cent climb on Friday amid a rally in higher-yielding assets. After a week of political limbo, Prime Minister Malcolm Turnbull claimed victory in Australia's July 2 election, though it remains unclear whether his coalition has enough seats to form a majority government. Neighbouring New Zealand's dollar weakened 0.1 per cent following a two-day surge of more than 2 per cent.

Commodities West Texas Intermediate crude fell 1.1 per cent to US$44.93 a barrel, after a 7.3 per cent slide last week that marked its biggest drop in five months. Crude resumed losses after data from Baker Hughes Inc showed US drillers boosted the number of rigs targeting oil to the highest in 12 weeks.

"When those rig numbers are up, we will see weakness in the oil price because it will bring on new supply," said David Lennox, an analyst at Fat Prophets in Sydney.

"Anything where it shows that supply is potentially able to come back on-stream will cause constant problems."

Gold rose 0.3 per cent, headed for its highest close since March 2014, and silveradvanced 1.5 per cent.

Bonds

US Treasuries due in a decade were little changed, with the yield holding near Friday's record-low closing level of 1.36 per cent.

"There is a large dichotomy between bond and equity markets and this will not last," Matthew Sherwood, head of investment strategy at Perpetual Ltd in Sydney, which manages about US$21 billion, said in an e-mail to clients.

"Equities recovered their early Brexit losses as the attractiveness of yield plays increased, rather than the outlook for growth plays improved."

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