Asia stocks at 1-year high on global easy money policy, oil jumps

Asian shares rose to one-year highs, expanding their gains this year to 10 per cent, supported by a jump in oil prices and investor expectations of an extended phase of easy monetary policy around the globe.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.3 per cent, bringing its gains so far this year to 10 per cent. Japan's Nikkei shed 1.6 per cent as the yen strengthened to one-month high.

European shares may retreat slightly from Monday's seven-week high, with spreadbetters calling Britain's FTSE 100 down 0.2 per cent, Germany's DAX down 0.1 per cent, and France's CAC down 0.3 per cent.

 

On Wall Street on Monday, S&P 500, Dow and Nasdaq stock indexes all closed at life-time highs, gaining 0.3 to 0.6 per cent. Brazilian shares also hit two-year highs, helped by higher oil prices.

Oil prices hit one-month highs on Monday, gaining 10 per cent or more in a three-day rally as speculation intensified over potential producer action to support prices amid a glut of crude.

Russian Energy Minister Alexander Novak said on Monday his country is consulting with Saudi Arabia and other producers to achieve oil market stability, bolstering hopes that oil producing nations could take action to stabilise prices.

The market started to rally on Thursday after Saudi energy minister said non-members and members of the Organization of the Petroleum Exporting Countries (OPEC) are to meet on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria from Sept. 26-28.

Brent crude traded at $48.04 a barrel, down 0.6 per cent from Monday but still not far from Monday's high of $48.46, its highest since July 12.

Brent has gained more than 9 per cent cumulatively since then. Since the start of August, it has risen more than 13 per cent.

In currencies, the dollar slipped slightly but was broadly stuck in its recent trading ranges as market players look to the minutes from the Fed's July policy meeting, due on Wednesday.

"At that meeting, the Fed revised up its view on the labour market and said risks to the economy diminished. So markets will be keen to see what discussion they had on future rate hikes," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Although Fed officials have said a rate hike is possible by the end of year, investors are not convinced the Fed can raise rates this year at all given the fragile global economic outlook. Its December rate hike was the first in almost a decade.

Most other countries are easing their monetary policies, with Britain, Australia and New Zealand cutting rates in recent weeks and Japan stepping up its purchasing of exchange-traded funds.

These measures pose a risk that any Fed tightening could strengthen the dollar to an uncomfortable level for U.S. companies and policymakers.

Fed funds futures are pricing in only about 50 per cent chance of one rate hike by December.

The dollar's index against a basket of six major currencies stood at 95.51, down 0.1 per cent on the day after having slipped 0.1 per cent on Monday.

The euro fetched $1.1186, off last week's high of $1.1222.

The yen rose 0.6 per cent to one-month high of 100.60 to the dollar.

The British pound slipped to near its three-decade low marked last month as traders brace for the first round of hard UK economic data on consumer and corporate reaction to June's vote for Britain to leave the European Union.

UK datafest begins at 0830 GMT on Tuesday when consumer and wholesale prices are announced. Economists expect consumer prices to have fallen 0.1 per cent on month in July.

"The market is so bearish on sterling that if we see higher figures than expected, we could see a big short-cover rally in the pound," said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.

The pound traded at $1.2887, having shed 2.5 per cent so far this month and coming within a cent from its July 6 low of $1.2798.