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Wellington - Asian stocks rallied from a three-and-a-half-year low as the potential for an expansion in central bank stimulus sparked a surge in shares and crude oil traded above $30 a barrel. Haven assets retreated.
The Topix index jumped the most since September in Tokyo, erasing Thursday’s selloff, and stocks in Hong Kong rebounded from the lowest since June 2012.
Energy equities drove gains across Asia as crude extended last session’s advance. The euro was near a two-week low after European Central Bank (ECB) chief Mario Draghi indicated he may bolster economic support as soon as March, and the yen headed for a weekly drop. Australian bonds declined, while the Korean won and Malaysian ringgit led gains among Asian currencies.
Global monetary policy is once again in focus amid signs some of the world’s key central banks may be prepared to act with markets rocked by uncertainty over China’s slowdown and oil’s crash. Diminished inflation expectations and a strengthening yen are seen as adding increasing pressure on the Bank of Japan to enlarge stimulus at its meeting next week.
China will keep intervening in its equity market to “look after” investors and has no intention of further devaluing the yuan, Vice President Li Yuanchao said in an interview with Bloomberg News in Davos.
“The cavalry might be coming to the rescue in terms of the central banks starting to sound more dovish,” Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors, which oversees about $120bn, said on Bloomberg TV. “There’s a little bit of light at the end of the tunnel. We’ve probably seen the worst and by the end of the year things will be a lot brighter than they are now.”
Thai and Malaysian foreign-currency reserve data are out Friday and Taiwan reports factory output.
Stocks
All 10 of the MSCI Asia Pacific Index’s industry groups advanced as the regional gauge climbed 3.4% as of 07:48, reducing its third straight weekly decline to 1.4%. The MSCI’s All-Country World Index has lost 1.2% since Monday, a slide that put the measure of global stocks on the brink of a bear market.
The Topix jumped 5.5%, its steepest one-day climb since September 9, while the Nikkei 225 Stock Average, which capped a 20% slide from its most recent high earlier in the week, gained 5.9% to trim its drop in the week to 1.1%. Hong Kong’s Hang Seng Index rose 2.3%.
Australia’s S&P/ASX 200 Index climbed 1.1%, rising for a second day to put the gauge on track for its first five- day advance in three weeks. The S&P/NZX 50 Index in Wellington added 0.7%, while South Korea’s Kospi index increased 1.9%, cutting its weekly decline to 2%.
Standard & Poor’s 500 Index futures rose 0.7% at 1 873.40 in Friday trading, following the US benchmark’s 0.5% rebound from a 21-month low.
“It’s typical for central bank action - or the prospect of some - to act as a catalyst for improving sentiment and last night’s price action bore that out,” Cameron Bagrie, chief economist in Wellington at ANZ Bank New Zealand, said in a client note.
“Climbs up the stairs invariably follow movements down the elevator as extreme pessimism corrects somewhat. However, problems are still numerous. If the post-global financial crisis era has taught us anything, it is that there is a limit to what central banks can, and should, do.”
Commodities
Gold trimmed its weekly advance as Asia stocks recovered and demand for haven assets eased. Bullion for immediate delivery fell 0.2% to $1 099.46 an ounce, slimming its gain for the week to 1%.
Oil extended its rebound, rising 3% to $30.41 a barrel on the New York Mercantile Exchange. Prices are headed for a 3.5% weekly gain, trimming its 18% drop so far this year.
“After large directional movements like those we’ve seen over recent weeks, there tends to be corrective move in the opposite direction” for oil, Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone.
Currencies
Malaysia’s ringgit and South Korea’s won led gains among emerging-market currencies. The ringgit rose 1.5%, the most since November, as the rebound in crude prices brightened prospects for Asia’s only major net oil exporter. The won gained 1.1%, its biggest advance in three months.
The yen was set for its biggest weekly drop in more than two months. The currency was down 0.3%, extending its weekly decline to 0.9%. The euro fell 0.4% against the dollar. Yields on Australian 10-year bonds rose 4 basis points, gaining for a second day.
“You have to respect the unanimous nature of the statement from the ECB last night which Draghi expressed, and also the volume of discussion within Japan,” Sam Tuck, a senior currency strategist at ANZ Bank New Zealand in Auckland. “Selling euro and yen seems only profitable if the markets’ fear permanently settles down. Both should depreciate when the safe haven flows dissipate.”
China’s seven-day repurchase rate, a benchmark for loans between banks, declined by nine basis points to 2.32% as the central bank stepped up efforts to address a cash squeeze. The authority told some banks to cancel repurchase agreements that were conducted at interest rates it deemed excessive and set limits for such loans, according to people familiar with the matter.
