U.S. crude and Brent oil futures climbed above $50 a barrel on Thursday for the first time in nearly seven months as a global supply glut that plagued the market for nearly two years showed signs of easing. Oil prices have rallied in recent weeks as a string of outages, due in part to wildfires in Canada and unrest in Nigeria and Libya, knocked out nearly 4 million barrels per day of production. Global benchmark Brent crude oil was up 60 cents at $50.34 a barrel at 7:49 a.m. ET, after a larger-than-expected draw in U.S. crude oil inventories last week indicated buyers are starting to mop up spare supply. U.S. crude futures were up 52 cents at $50.08 a barrel, the highest since mid-October.
The recent comments by Fed policymakers have put a possible rate hike this summer firmly on the table for discussion. U.S. interest rate futures are still pricing in only about one-third chance of a rate hike in June and about 60 percent likelihood by July.
Financial markets have a more appropriate reading now on the chances of a U.S. interest rate rise in June than before, St. Louis Federal Reserve President James Bullard said on Thursday. "I think they read the minutes correctly," Bullard told reporters after a speech in Singapore, referring to the minutes of the Fed's latest policy meeting in April.Global investors, many of whom had assumed the Federal Reserve was in no rush to raise interest rates, were jolted last week by the minutes which suggested most policymakers felt the U.S. economy could be ready for another rate increase in June. Bullard said is keeping an open mind on whether the Fed should raise interest rates at its June 14-15 meeting, adding that he wanted to see economic data that is available then.
Among Asian bourses
Australia Market ends higher
Australian share market closed slight higher on the back of strength in energy and material stocks thanks to strength in crude oil and base metal prices. At close of trade, the benchmark S&P/ASX 200 index inclined 15.60 points, or 0.29%, to 5388.10. The broader All Ordinaries added 15.10 points, or 0.28%, to 5451.90. Rising stocks outnumbered declining ones on the Australia Stock Exchange by 554 to 432 and 316 ended unchanged. The S&P/ASX 200 VIX, which measures the implied volatility of S&P/ASX 200 options, was down 0.01% to 16.857 a new 1-month low.
Shares of energy players reaped the gains from the rising crude oil prices, with Oil Search up 0.1% to A$6.71, Santos up 4.9% to A$4.49 and Woodside up 2% to A$27.71. Poker machine maker Aristocrat Leisure rose 0.1% to A$12.45 after boosting its net profit for the first half of 2016 by 66% to $A183.2 million due to strong growth in Australia and North America and more punters using its social gaming apps.Materials and resources stocks also rallied. Global miner BHP Billiton advanced 2.7% to A$19.41 and Rio Tinto jumped 1% to A$45.48. Pure-play iron ore producer Fortescue Metals added 2.1% to A$2.96.
Consumer staples were the major drag on the market, with Wesfarmers declining 3.6% to A$40.40 in the wake of Wednesday's A$2.3 billion Target write-down and after a analysts at Deutsche Bank said they now expected a 10% cut in the company's dividend this financial year, from A$2 to A$1.80. Citi also tipped a dividend cut, but by a much lower 3 cents to A$1.97, while Macquarie predicts a reduction to $1.92. Wesfarmers' main competitor, Woolworths, also had a poor day, losing 1.2% to A$22.01.
Japan Stocks rise on positive offshore lead
The Japan share market ended slight higher, helped by positive cues from global markets overnight and continued gains in oil prices. But gains were marginal as investors were awaiting comments from Federal Reserve Chairwoman Janet Yellen for more indications about whether the central bank would raise rates in near term. She is scheduled to speak at Harvard University on Friday. The 225-issue Nikkei average climbed up 15.11 points, or 0.09%, to close at 16,772.46. The Topix index of all first-section issues ended marginal 0.01 point down at 1,342.87. Rising stocks outnumbered declining ones on the Tokyo Stock Exchange by 940 to 877 and 180 ended unchanged. The Nikkei Volatility, which measures the implied volatility of Nikkei 225 options, was up 0.08% to 26.19.
Shares of energy explorers were the biggest gainers on the Topix as Inpex Corp. jumped 2.6 percent and refiner JX Holdings added 1.4 percent. Drugmakers provided the second-largest gain on the gauge. Aska Pharmaceutical Co. advanced 4.8 percent, Shionogi & Co. rose 2.3 percent and Takeda Pharmaceutical Co. added 1.8 percent. Mitsubishi Motors Corp. climbed 5.3 percent to be the biggest gainer on the Nikkei 225. Haseko Corp. rose 5.2 percent after Daiwa Securities Group raised its rating on the builder to buy from outperform.
Takata Corp. surged 21 percent, the daily limit, after the Nikkei newspaper reported KKR & Co., a private equity firm, may support and take control of the company responsible for the biggest safety recall in auto industry history.
By contrast, shipping stocks were biggest losses on the Topix, with Mitsui OSK Lines down 4 percent. Softbank Group Corp. sank 3.7 percent after Alibaba Group Holding fell the most in four months as the e-commerce giant said it's being investigated by the U.S. Securities and Exchange Commission over its accounting practices and whether they violate federal laws. Softbank owns large equity stakes in Alibaba Group.
China Market ekes out gain on large cap buying
Mainland China stock market eked out gains, as late buying of large cap stocks helped equities bounce off the 2-1/2 month lows hit in the morning session. However, market gain was limited on growing worries that the economy was losing steam again after a promising start to the year. The CSI300 index of the largest listed companies in Shanghai and Shenzhen added 0.16%, to 3,064.21, while the Shanghai Composite Index grew 0.26%, to 2,822.44 points.
Sentiment toward health of the world's second largest economy turned bearish after data earlier this week showed China's state-owned firms' profits fell 8.4 percent year-on-year in the first four months of this year from a year earlier, while their debts surged 18 percent, highlighting the challenges Beijing faces as it tries to restructure the bloated state sector as the economy slows.
Moody's ratings agency said that China's authorities have the tools to avert a financial crisis, but erosion of credit quality is likely over the medium term. "China's growing debt overhang will impose a substantial deadweight cost on the economy that will need to be allocated between the state, banking system, and corporate and household sectors," the credit rating agency said in a report on Thursday.
Shares of material and resources companies advanced, with coal producers leading the advance, with China Coal Energy Co. adding 1.9 percent. Energy companies were boosted as the government allowed retail fuel prices to be increased and Brent surged amid signs global oversupply will ease. China Petroleum & Chemical, known as Sinopec, increased 0.9 percent.
China Molybdenum Co. jumped by the daily 10 percent limit after resuming trade as the producer of niche metals sought to reassure investors that it can manage to fund the planned acquisition of overseas assets totaling more than $4 billion.
By contrast, Airline carriers went lower, with China Eastern Airlines Corp leading declines, down 2.4 percent, as rising fuel prices risk a profits reversal for Chinese airlines, which reported surging earnings last year.
Hong Kong Market ends higher
The Hong Kong stock market closed little changed in narrow trade, helped by positive close on the Wall Street overnight and continued gains in oil prices. But gains were capped on caution before comments from Federal Reserve Chairwoman Janet Yellen for more indications about whether the central bank would raise rates in near term. The benchmark Hang Seng Index advanced 29.06 points, or 0.14%, to 20397.11 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, fell 10.19 points, or 0.12%, to 8526.19. Turnover reduced to HK$46.4 billion from HK$62 billion on Wednesday.
Energy companies rallied the most in Hong Kong, after crude oil prices touched US$50 level in Asia hours today. CNOOC (00883) gained 2% to HK$9.37. Sinopec (00386) added 1.3% to HK$5.32. PetroChina (00857) edged up 0.4% to HK$5.35.
Belle (01880) dipped 6.3% to HK$4.43 after reporting its earnings, which triggered a slew of research houses' bearish comments. It became the top blue-chip loser today. Tingyi (00322) and Want Want (00151) saw buying orders support, rising 3% to HK$8.3 and HK$5.64. Want Want was the top blue-chip winner today.
Indian market settles above key levels
Prime Minister Narendra Modi's comments in an interview to a foreign newspaper indicating that further economic reforms are on the cards triggered the latest rally on the domestic bourses. The barometer index, the S&P BSE Sensex, surged 485.51 points or 1.88% to settle at 26,366.68. The Nifty surged 134.75 points or 1.7% to settle at 8,069.65.
Modi said he had opened up more of the economy to foreign investment and made changes to curb corruption, fill gaps in rural infrastructure and make it easier to do business. He also said that he has an enormous task ahead. The Prime Minister said that he expects the goods and services tax (GST) bill to pass this year. The BJP led National Democratic Alliance (NDA) government completed two years in office today, 26 May 2016. The prime minister said that he would look to state governments to further liberalize the country's rigid labour laws.
Strong Q4 March 2016 results from engineering and construction major L&T and the company's guidance of a 15% growth in order inflow during the current financial year also aided the latest rally on the bourses. L&T shares surged 13.85% after the company announced the results and the order inflow guidance after trading hours yesterday, 25 May 2016.
Capital goods stocks edged higher after the Union Cabinet approved the National Capital Goods policy to support and boost development of this crucial sector. Bank stocks edged higher after global credit rating agency Moody's Investors Service said in a report that the new bankruptcy code will address several key inefficiencies in the current legal framework for asset resolution in India and is credit positive for Indian banks. Yes Bank edged higher after the Cabinet Committee on Economic Affairs cleared the bank's proposal for increase in foreign investment limit in the bank's equity capital to 74% from 41.87% without any sub-limits.
Elsewhere in the Asia Pacific region: New Zealand's NZX50 inclined 0.58% to 6947.88. South Korea's KOSPI index fell 0.18% to 1957.06. Taiwan's Taiex index sank 0.02% to 8394.12. Malaysia's KLCI rose 0.01% to 1631.09. Indonesia's Jakarta Composite index added 0.24% to 4784.56. Singapore's Straits Times index grew 0.24% to 2773.31.
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