Asia: Stock rally continues as oil holds above US$34, ringgit gains

[WELLINGTON] Asian stocks extended gains at levels last seen at the start of the year as crude oil maintained its rally, while bonds in the region declined after a run of data burnished optimism over the US economy.

The benchmark gauge for Asian equities rose a third day, with Japan's Topix index extending its advance at the highest level since Feb 8 as the yen failed to build on Wednesday's rebound.

US crude clung to its rally, trading at US$34.67 a barrel amid declines in American oil production. Malaysia's ringgit jumped with the Korean won.

Yields on Australian government debt due in a decade rose to a two-week high as rates on similar-maturity Korean notes climbed.

Better-than-expected US economic data and signs China is working to regain investors' confidence has helped ease financial markets out of turmoil mode, with global equities more than halving their 2016 losses since hitting a 2 1/2-year low three weeks ago.

A private report on American payrolls fueled Treasury losses Wednesday, with the steeper-than-projected increase in workers reigniting bets on a potential interest-rate increase this year. A swathe of services-industry measures are due Thursday and attention will start shifting to China's National People's Congress, which gets under way Saturday.

"The better US data flow continued to support the improvement in risk appetite in financial markets," Sharon Zollner, a senior economist in Auckland at ANZ Bank New Zealand Ltd, said in a client note.

"Global markets have broadly had a much better time of it in recent weeks as speculation rises that the early-year pessimism was overcooked, particularly regarding the US. However, while a calmer assessment is very welcome, there are some fundamental issues that haven't gone away."

Thailand reports on consumer confidence Thursday, and Hong Kong posts data on retail sales. Services purchasing managers' indexes for China to India, the US and the euro area are also due.

Stocks

The MSCI Asia Pacific Index added one per cent as of 9:58 am Tokyo time, set for its highest close since Jan 6 as the Topix climbed 1.3 per cent, led by banks and mining shares.

"US markets were stronger, and we're seeing follow through buying from yesterday, while oil is steady," said Andrew Clarke, Hong Kong-based director of trading at Mirabaud Asia Ltd.

The Kospi index in Seoul added 0.2 per cent with South Korea reporting faster-than-projected growth in consumer prices early Thursday. Mining and energy stocks drove Australia's S&P/ASX 200 Index up 0.9 per cent, while New Zealand's S&P/NZX 50 Index extended gains into a fourth day, adding 0.6 per cent.

S&P 500 futures fell 0.1 per cent to 1,982 Thursday after a 0.4 per cent climb in the US benchmark that took hold in the last hour of New York trade. Energy shares listed in the US jumped 2.5 per cent to their highest level since Jan 5.

Futures on Hong Kong's Hang Seng Index dropped 0.1 per cent in most recent trading, while those on the Hang Seng China Enterprises Index, a gauge of mainland Chinese equities listed in the city, fell 0.2 per cent.

Currencies

The ringgit strengthened a sixth straight day, on track for its longest rally since the end of January as crude held onto its three-day revival.

The won climbed a fifth day, its longest run of gains since October, as the recovery in stocks and oil's stabilization burnished risk appetite.

The yen, which typically moves at odds with Japanese shares, slipped 0.2 per cent to 113.71 per US dollar after rallying 0.5 per cent last session.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was little changed after slipping 0.6 per cent over the past three days.

Bonds Yields on Australian 10-year bonds rose by seven basis points, or 0.07 per cent age point, to 2.53 per cent, set for their highest close since Feb 18.

Rates on New Zealand debt due in a decade added three basis points to 3.06 per cent, while Korean yields were up a basis point to 1.84 per cent.

Ten-year Treasury yields gained another basis point to 1.85 per cent after jumping 11 basis points the previous two sessions. The 10-year break-even rate, the bond market's implied average annual inflation rate for the next decade, surpassed 1.5 per cent age points for the first time since January.

Commodities

West Texas Intermediate crude was little changed Thursday following gains on Wednesday that brought its three-day climb to more than 5 per cent.

US oil output fell for a sixth week to 9.08 million barrels a day, the lowest level since Nov 2014, according to government data, while crude inventories rose, keeping supplies at the highest in more than eight decades. Saudi Arabia increased the price formula for shipments of its benchmark grade to Asia for April to the highest since October, according to a statement.

Gold was steady at US$1,239.39 an ounce after gaining 0.6 per cent last session. The precious metal has rallied 17 per cent so far this year.

BLOOMBERG