Stocks Gain With Copper as Risk Appetite Spreads Across Markets 

• European, U.S. factory data due after mixed China reports
• India expected to keep rates on hold after RBA stands pat

Asian stocks advanced with commodity-linked currencies and metals as investors focused on the positives in data from the region’s biggest economy. U.S. index futures gained, as did oil.

Benchmark share measures from Hong Kong to Sydney and Seoul climbed at least 1.4 percent as Standard & Poor’s 500 Index futures rose 0.6 percent. A private measure of China’s factories came in stronger than economists had expected and an official non-manufacturing gauge signaled faster expansion, while the government’s factory index slid to the lowest in more than three years. Copper advanced for a second day. Australia’s dollar maintained its advance after the nation’s central bank left borrowing costs unchanged, while Indian rupee forwards strengthened before an interest-rate review.

“Markets are coming around to the idea that with the non-manufacturing side of it improving, China’s at least moving in the correct direction,” said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd. in Auckland. “Markets are certainly expecting the RBA to be on hold and potentially looking for any increased rhetoric on the Aussie dollar.”

Equities have wrapped up the year with gains on all but five occasions since 1988, with December posting the biggest and most frequent increases of any month, data compiled by Bloomberg show. Manufacturing data for Europe and the U.S. are due later Tuesday. There’s a euro-area monetary policy decision on Thursday and an address by Federal Reserve Chair Janet Yellen to Congress, before a U.S. payrolls report Friday. The International Monetary Fund said Monday it will add the yuan to its basket of reserve currencies, the first change to the Special Drawing Rights basket since 1999.

Positive Statement

“Having the currency in the SDR basket is a positive statement about the progress they have made in terms of reforms in the financial sector,” Ng Soo Nam, Singapore-based head of Asian equities at Columbia Threadneedle, which manages about $506 billion globally, said by phone. “This reflects a level of confidence on the robustness of the financial system in China. This will help investor sentiment.”

Stocks

The MSCI Asia Pacific Index rose 1.4 percent as of 1:12 p.m. in Hong Kong, after sliding 1 percent last session to cap its sixth monthly decline since May.

In Japan, the Topix index added 0.9 percent after gaining 1.4 percent in November. The Kospi index in Seoul climbed 1.4 percent after South Korean exports fell less than expected last month, while Hong Kong’s Hang Seng Index jumped 1.7 percent.

Australia’s S&P/ASX 200 Index rallied 1.9 percent, the most since Nov. 19. China is the resource-rich country’s biggest trading partner. Reserve Bank of Australia Governor Glenn Stevens and his board kept the cash rate at a record-low 2 percent Tuesday, as forecast by all 29 economists. The decision followed an improvement in consumer confidence while employment in October grew the most since March 2012.

The official manufacturing PMI for China slipped to 49.6 for November, according to the National Bureau of Statistics, with economists predicting a reading of 49.8. A private manufacturing PMI reading by Caixin Media and Markit Economics rose to 48.6 from 48.3, still below the 50 level that divides expansion and contraction. The official non-manufacturing index climbed to 53.6 from 53.1.

“The PMI was worse than expected, so this may prompt more stimulus,” said Mikio Kumada, a Hong Kong-based global strategist at LGT Capital Partners. “The seasonal pattern always favors equities toward the end of the year.”

Currencies

The Bloomberg Dollar Spot Index, a gauge of the U.S. currency against 10 major peers, slid 0.1 percent after posting a 2.3 percent increase in November. The greenback has seen support as odds of the Fed raising rates this month hold above 70 percent.

Australia’s dollar climbed 0.5 percent to 72.63 U.S. cents, building on its November advance. The New Zealand dollar gained 0.6 percent and Malaysia’s ringgit added 0.5 percent.

One-month non-deliverable forwards on India’s rupee climbed 0.4 percent to 66.79 per dollar after data Monday showed India’s economy grew 7.4 percent in the July-to-September period from a year earlier, exceeding predictions for growth of 7.3 percent. The report bolstered speculation the central bank will hold rates after cutting them this year by the most since 2009.

The euro added 0.1 percent to $1.0579 after touching its weakest level since April on Monday. Economists unanimously predict an expansion in economic stimulus from the ECB this week.

Japan’s yen strengthened 0.2 percent against the greenback after the Wall Street Journal reported that the nation’s giant pension fund had started hedging a small amount of its investments against fluctuations in the euro.

Commodities

West Texas Intermediate crude oil rose 0.7 percent to $41.94 a barrel. OPEC, which will gather Dec. 4 in Vienna, pumped 32.12 million barrels a day last month, according to a Bloomberg survey of oil companies, producers and analysts. That’s the 18th month above its target. U.S. crude stockpiles probably declined for the first time in 10 weeks, a separate Bloomberg survey showed before inventory data Wednesday.

Copper climbed 0.7 percent and nickel added 0.1 percent. Precious metals also advanced, with spot gold rising 0.5 percent and platinum up 1.1 percent.

There’s still money to be made from investing in commodities, according to Citigroup Inc. While a rising U.S. dollar, sustained oversupply and slowing growth in emerging economies including China are still hurdles to a recovery, many markets may strengthen in the second half of next year as the collapse in prices shrinks production, the bank said in a report.

Source: Bloomberg – Stocks Gain With Copper as Risk Appetite Spreads Across Markets

---