Asia: Stocks rise as yuan strengthens, oil rebounds

[SYDNEY] Asian equities rose, as gains in Japan helped offset declines in China, as investors weighed economic data and the possible path for interest rates. The yuan extended gains and oil rebounded.

Japan's Topix advanced after capital spending topped estimates. The Shanghai Composite Index retreated with the Aussie dollar after a private gauge of China's manufacturing fell below 50.

The onshore yuan headed for the biggest four-day advance in almost 12 years amid speculation policy makers are trying to discourage bets against the currency. Crude oil rebounded from a slide triggered by doubts that an Opec deal extension will be enough to combat higher production.

Global equities ended May just shy of a record as earnings growth supports optimism in the global economy, offsetting concerns for the inflation outlook. Data showed capital spending in Japan topped estimates during the first quarter, while corporate profits jumped 27 per cent.

In China, the weakness in the Caixin manufacturing gauge - with a smaller sample size - contrasts with the government's reading Wednesday showing the manufacturing PMI was steady last month.

Federal Reserve Bank of San Francisco President John Williams said in Seoul that if the US economy is strong enough, the central bank can raise interest rates four times in 2017. Policy makers meet in two weeks, while Friday's jobs report may shed more light on the state of the world's largest economy.

Meanwhile, four straight months of gains in 10-year Treasuries come as Dallas Fed boss Robert Kaplan said he's concerned about recent declines in the core measure of inflation. Pacific Investment Management Co says there's a 70 per cent chance of a US recession in the next five years and investors should consider building cash for when markets eventually correct or overshoot.

The US jobs report Friday may bolster the case for a rate hike, with a gain of 180,000 positions expected.

Stocks

Japan's Topix index rose one per cent as of 12:16pm in Tokyo, after jumping 2.4 per cent in May for its biggest monthly gain of the year. Singapore's Straits Times Index climbed 0.5 per cent.

Sydney's S&P/ASX 200 Index rose 0.2 per cent after swinging between gains and losses amid economic releases from Australia and China.

Hong Kong's Hang Seng Index climbed 0.4 per cent after completing its fifth straight monthly gain, the longest winning streak since 2013. The Shanghai Composite Index slipped 0.4 per cent, after a four-day rally.

Futures on the S&P 500 added 0.1 per cent. The underlying gauge fell 0.1 per cent Wednesday, trimming its May gain to 1.2 per cent. It closed Friday at a record.

Currencies

The onshore yuan climbed 0.4 per cent. The currency is up 1.4 per cent over the latest four days, trading at the highest level since November.

The yen slipped 0.2 per cent to 110.95 per US dollar, after gaining in the month of May. The Bloomberg Dollar Spot Index was little changed, following a 1.5 per cent decline for May for the biggest monthly drop since January.

The Australian dollar dropped 0.5 per cent. The currency spiked after retail sales were stronger than expected, but reversed gains on China's manufacturing data.

The pound fell 0.1 per cent to US$1.2873. The latest Times/YouGov poll showed the Conservatives leading Labour by just three points.

Commodities

West Texas Intermediate crude oil advanced 0.8 per cent to US$48.68 a barrel, rebounding from a 2.7 per cent drop in the previous session.

Gold was little changed at US$1,269.21 an ounce.

Bonds

The yield on 10-year Treasuries rose less than one basis point to 2.21 per cent, after falling a similar amount on Wednesday.

Benchmark yields in Australia dropped two basis points to 2.37 per cent.

BLOOMBERG