Thursday 03:40 BST. Brent crude rose through $ 50 a barrel, but that was insufficient to keep most Asian equity markets aloft as they struggled to match a positive lead from Wall Street.
The international oil benchmark rose as much as 0.7 per cent to $ 50.10 a barrel in morning trading in Asia, the highest level since November, while West Texas Intermediate, the US marker, was up 0.5 per cent at $ 49.82. Oil prices have been buoyed by weekly data, with the most recent report out overnight showing that US crude stockpiles have fallen more than expected.
The energy sectors in Japan, Australia and Hong Kong were the best performers in their respective stock markets. Japan’s broad Topix and the Nikkei 225 were each up 0.3 per cent, while Australia’s S&P/ASX 200 eased 0.2 per cent.
Hong Kong’s Hang Seng was off 0.3 per cent while on the mainland, the Shanghai Composite was down 0.8 per cent and the Shenzhen Composite shed 1.4 per cent.
In New York trading the S&P 500 rose 0.7 per cent, having posted its best one-day gain since March 11 in the previous session, led on both days by financial and energy stocks.
The price of Brent crude is now up about 80 per cent since hitting 12-year lows in January, supported by hopes that major producers would agree to freeze output, a stabilisation in China’s economy and supply disruptions in Canada and Nigeria.
The supply and demand fundamentals of the energy market are becoming a tailwind for inflation and will help keep deflation at bay, according to Richard Turnill, chief investment strategist at BlackRock.
“Oil supply has tightened, and demand is picking up, primarily out of China and India. This suggests current prices look increasingly sustainable, unless we get a significant reopening of idled shale-oil production. It points to energy’s downward pressures on inflation beginning to subside, in line with the view expressed in hawkish Fed meeting minutes released last week,” he said.
The dollar index, a measure of the US currency against a basket of global peers, was down 0.2 per cent in Asia at 95.186, providing broad support for other commodity prices. Gold was up 0.6 per cent at $ 1,231.70 an ounce in Asia, on the heels of an overnight rise in an index of base metals prices on the London Metal Exchange rose overnight.
The advance put the yellow metal on track to end a six-day losing streak — its longest since November — which had been brought about by recent strength in the dollar as investors warm to the idea the US Federal Reserve could lift interest rates sooner than the market previously expected, possibly as early as June.
Malaysia’s ringgit was rallying alongside the oil price, up 0.6 per cent against the US dollar, while other emerging market currencies were also benefiting, with the Indonesian rupiah and Thai baht each up 0.4 per cent.
The Japanese yen was 0.5 per cent stronger at ¥109.67 per dollar. The Australian dollar reversed early declines to be 0.2 per cent higher at US$ 0.7209 following the release of key capital expenditure data.
Although private capex fell 5.2 per cent year-on-year in the first three months of 2016, more than the 3.2 per cent drop expected, traders were encouraged by forecasts spending next year of A$ 89.2bn, which was A$ 2.5bn above economists’ expectations.
“Australia’s private capital expenditure survey for the second quarter probably isn’t weak enough to prompt the [central bank] to follow May’s rate cut to 1.75 per cent with another reduction in June, but it does support our view that rates will soon be cut to 1.50 per cent and that rates will remain low for a couple of years,” said Paul Dales at Capital Economics.
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