Asian Stocks Climb With Oil Near $50 as Fed Bets Weigh on Bonds 

• Yen steadies after seven-day slide as Korean won gains
• Samsung Electronics rises to all-time high; Sompo surges

Asian stocks rose as the yen’s slide to a one-month low boosted Japanese exporters and energy companies rallied following gains in oil prices. Bonds extended losses after a pickup in U.S. services activity bolstered the case for an interest-rate hike this year.

The MSCI Asia Pacific Index climbed to a one-week high. The yen was little changed after falling for seven days, the longest losing streak since March. The Bloomberg Dollar Spot Index held near a two-week high and Australian bonds dropped after a report showed U.S. services output expanded in September at the fastest pace in almost a year. Crude traded near the highest level since June after American stockpiles dropped, while gold declined for an eighth day.

“Data has been consistent with the Fed moving in December,” said Chris Green, the Auckland-based director of economics and strategy at First NZ Capital Group Ltd. “The rebound in crude oil adds to the positive backdrop for inflation and that could provide a rationale for the rates to move as well. The Fed has a delicate balancing act. They’d want to normalize rates as the economy improves but at the same time they don’t want to scare the financial system.”

The outlook for monetary policies in the world’s biggest economies is dominating investor sentiment this week, with bets on a Fed rate rise in December mounting amid signs that unprecedented stimulus is drawing to an end in Europe and Japan. The European Central Bank’s plans may become clearer on Thursday when the minutes of its last policy meeting are released, while American jobs numbers on Friday will help shape expectations for U.S. borrowing costs before the nation’s earnings season kicks off next week.

Stocks

The MSCI Asia Pacific Index added 0.5 percent as of 1:20 p.m. Tokyo time with a measure of energy stocks surging 1.9 percent, the best performance among 10 industry groups.

“The main driver is a rally in oil prices,” said Jingyi Pan, a Singapore-based strategist at IG Asia Pte. “The oil price increase outweighs concerns about a Fed hike at the moment. “For emerging markets, volatility will rise occasionally, as shown yesterday when we had some taper tantrum.”

Japan’s Topix index gained 0.6 percent as Toyota Motor Corp. rallied for a fourth day. Hong Kong’s Hang Seng Index advanced to its highest level in almost four weeks, while markets in China remained closed for a week-long holiday.

Samsung Electronics Co. jumped as much as 5 percent to an all-time high in Seoul. The world’s largest smartphone maker is being urged by activist investor Elliott Management Corp. to restructure its business into two units.

Sompo Holdings Inc. jumped by the most since February in Tokyo after the insurer said it agreed to buy New York-listed Endurance Specialty Holdings Ltd. for about $6.3 billion. Fujitsu Ltd. surged more than 6 percent after the company was reported to be in talks to sell a majority stake in its personal-computer business to Lenovo Group Ltd., which advanced 2.5 percent in Hong Kong.

S&P 500 Index futures declined 0.1 percent, following a 0.4 percent gain in the U.S. benchmark on Wednesday.

Currencies

The yen was little changed at 103.45 per dollar after sliding more than 3 percent over the last seven trading days. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, held near a two-week high. Futures price indicate that the chance of the Fed pulling the trigger on a rate hike by the end of this year climbed to 62 percent on Wednesday, from 54 percent a week earlier.

“We’ve seen the implied probability of a Fed hike in December increase in the past week and that has pushed Treasury yields up,” said Chris Weston, chief markets strategist at IG Ltd. in Melbourne. “A continued steepening in the U.S. yield curve would mean the dollar will sustain its upside.”

South Korea’s won strengthened 0.2 percent, advancing for the first time in a week. The yuan was little changed at 6.6745 a dollar in offshore trading, after earlier weakening beyond 6.70 — a level seen as a red line for China’s central bank — for the first time in three weeks.

Bonds

The yield on Australian bonds due in a decade rose three basis points to 2.16 percent, extending this week’s surge to 20 basis points. Similar-maturity U.S. Treasuries fell for a fifth day, lifting their yield to a two-week high of 1.71 percent. A Bloomberg index of developed-market sovereign debt ended Wednesday at the lowest level since July.

“It seems that bond investors are becoming increasingly aware that the music is going to stop at some point,” Sharon Zollner, a senior economist in Auckland at ANZ Bank New Zealand Ltd., said in a client note. The potential for “ECB tapering, the Bank of Japan’s change of tack, pricing for 2016 Fed hikes lifting on improving U.S. data -– it all points to the same unpalatable fact: bonds are risky.”

Commodities

Crude oil declined 0.6 percent to $49.51 a barrel in New York, after advancing 2.3 percent to a three-month high on Wednesday. U.S. stockpiles fell below 500 million barrels last week for the first time since January, official data show. The oil rally will stall at $55 a barrel as American shale drillers get back to work, according to Goldman Sachs Group Inc.

“There is a bit of a cap for oil at about $50 because above that level, once we head up toward $55 a barrel, there’s concerns that U.S. shale producers will jump back into action,” said Michael McCarthy, chief market strategist in Sydney at CMC Markets. “The draw in crude stockpiles is clearly one of the factors contributing to the positive momentum.”

Gold fell 0.1 percent, extending its longest losing streak since May. Nickel held near a two-week low in London as investors assess a Philippines mining audit that could prompt shutdowns in the world’s biggest supplier, and news that Indonesia may resume some sales of nickel ore.

Source: Bloomberg

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