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Asian stocks extend $2.5trn global rebound

Singapore - Asian stocks rose, extending a global equity rally, and Indonesia’s rupiah was headed for its best week since 2001 as investors piled back into riskier assets amid speculation the Federal Reserve won’t be raising interest rates until risks from outside the US subside.

About $2.46trn was added to the value of global stocks in the first four days of this week as emerging-market equities rebounded.

European share futures advanced and an MSCI gauge of developing-economy stocks was set for its best week in almost four years, led by gains in Chinese shares listed in Hong Kong.

The rupiah and Malaysia’s ringgit both gained more than 7% since last Friday, sending the Bloomberg JP Morgan Asia Dollar Index to a two-month high. Zinc surged as Glencore Plc said it would cut output.

“This looks like a sustainable turnaround,” Michael McCarthy, chief market strategist in Sydney at CMC Markets, said by phone. “Investors have become less pessimistic. Things are definitely not in a strong economic environment but there is an expectation of further central bank support.”

Global stocks are staging a comeback in the wake of their worst quarter since 2011 as signs of an uneven recovery in the US job market and data indicating slowing growth from China and Japan to Germany and the UK spur stimulus bets.

With futures trading putting the odds the Fed will raise rates this year below 40%, Nobel prize-winning economist Joseph Stiglitz said he hopes rates don’t rise because America’s “anemic” recovery needs continued support.

Oil’s rebound has also underpinned equity gains, amid speculation demand is picking up and as tensions in the Middle East increased.

Stocks

The MSCI Asia Pacific Index rose 1.9% by 08:04, headed for a 5.8% gain this week. That’s the biggest jump since December 2011. Euro Stoxx 50 Index futures climbed 1.1%.

The MSCI Emerging Markets Index climbed 1.4% on Friday, led by a 2.6% rally in the gauge of Chinese shares in Hong Kong. The developing-economy equity measure touched its lowest level in six years in August as Chinese equities plunged.

The Shanghai Composite Index climbed 1.3% on Friday. The benchmark gauge for mainland China’s biggest trading venue climbed 3% on Thursday, an underwhelming gain for its first day of trading after a week-long holiday during which its Hong Kong peer surged 11%.

Futures on the Standard & Poor’s 500 Index rose 0.1% after the index closed Thursday above 2 000 points for the first time since August 20. Energy producers drove the advance, climbing 1.9% as West Texas Intermediate crude rose above $50 a barrel for the first time since July.

Minutes from the Fed’s September meeting kept expectations for higher rates pushed into next year, weakening the dollar and boosting energy, raw-material and industrial companies amid speculation that a weaker US currency will lift their profits.

The Fed noted that domestic economic conditions had continued to improve, though concerns over China and its potential spillover to other economies “were likely to depress US net exports.”

 Japan’s Topix index jumped 2.1%, set for a weekly advance of 4.7%. In Australia, the S&P/ASX 200 Index gained 1.3%, capping a 4.5% weekly rally that marked its best performance since 2011. Markets in Taiwan and South Korea are closed for holidays Friday, while Japan’s will be shut on Monday.

Currencies

Emerging-market currencies headed for their biggest weekly gain in more than six years. A Bloomberg index tracking 20 developing-nation currencies climbed 3.3% this week, recovering from its biggest quarterly loss since 2011.

Indonesia’s rupiah, Russia’s ruble and Malaysia’s ringgit were the world’s best performers with gains of more than 7% versus the dollar.

The rupiah gained 3.9% on Friday, leading gains in emerging markets. The ringgit ranked second with a 2.9% advance. Both currencies sank to their weakest levels since the 1998 Asian financial crisis during the third quarter.

“What we’re seeing is that people are continuing to cover their short positions in the two currencies,” said Divya Devesh, Standard Chartered’s Asian foreign-exchange-strategist in Singapore. “It’s going to be critical to watch China data because that could be the turning point” and the rally isn’t supported by fundamentals, he said.

All 23 developing-nation currencies tracked by Bloomberg are projected to weaken versus the greenback by the first quarter, and Credit Suisse Group AG to Pacific Investment Management say the current rally will prove fleeting.

Pimco, which oversees $1.52trn of assets, said Thursday it expects emerging-market currencies to come under renewed pressure and favors investments that will profit from their depreciation.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, fell 0.1%. The gauge is heading for a weekly loss of 1.1%, its worst five days since mid- June.

Odds of the Fed boosting rates from near zero at their meeting this month are at 10%, according to Fed funds futures, while the chance of a move in December is holding below 40%, down from 59.9% a month ago.

That stands in contrast to comments from Fed officials including chair Janet Yellen, who have touted the possibility of a rate rise before the year is out since the September 17 decision.

Commodities

Zinc for three-month delivery on the London Metal Exchange jumped 6.2%, heading for the biggest daily advance since 2010.

Glencore plans to cut production of the metal by about a third, having already curbed copper and coal output, as the Swiss mining and trading giant continues to navigate a rout in commodity prices that last week briefly wiped $6bn from its market value.

The Bloomberg Commodity Index advanced 0.9% on Friday, set to erase September’s retreat. Gold for immediate delivery advanced 0.8%.

Oil is the standout performer among commodities this week, with WTI headed for its steepest weekly advance since August. Brent crude gained 1.5% on Friday to $53.84 a barrel, leaving it up 12% in the week, the most since March 2009.

A “new capital discipline” in the industry will allow consumption to catch up with supply, boosting prices, Gary Ross, the founder and chairperson of PIRA Energy Group, said Thursday. World oil use will expand more than forecast this year, according to OPEC Secretary-General Abdalla Salem El-Badri.

The rebound in oil bolstered energy stocks, with the industry group leading gains in Asia and the world this week as the dollar faltered.

WTI spiked above $50 last session amid reports that Russian cruise missiles meant for Syria had landed in Iran.


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