Hong Kong: Asian stocks are heading for their biggest weekly gain in three months on bargain-hunting after their recent drop while the euro perked up after the central bank signalled a rate hike as early as next month.
Friday’s gains brought stocks to near levels since the Libyan crisis erupted, indicating markets have been largely resilient to oil’s near 15% surge in the past two weeks.
A reasonably strong correlation between Asian equities and oil shows both track the broad growth story except for periods when markets have grown nervous of a price shock because of the resulting spillover impact on inflation and growth.
The region is a big importer of oil.
But the pull-back in Brent crude prices from 2-1/2 year highs after a key technical indicator rose to its most overbought level in more than five years, eased oil worries for the region.
Hopes that US jobs data due later may show strong gains and reinforce expectations of a steady improvement in the world’s biggest economy boosted stocks across the region with Tokyo and Seoul ending up more than a% each.
Further gains on Wall Street appear difficult with the S&P 500 set to run into strong resistance around the 1,340-60 zone. The index ended up 1.72% at 1,330.97 points.
The broader MSCI index of Asia-ex Japan stocks rose more than 1% with buying scattered across financials, industrials and materials.
For the week, it is up nearly 3%, heading for its its biggest weekly rise since early December.
The median estimate is for a gain of 185,000 jobs, according to economists polled by Reuters, but market sentiment was leaning toward a number above 200,000, traders said.
Notwithstanding the Libyan crisis, Asian markets have generally underperformed this year as inflows into emerging market funds have slowed sharply due to concerns of inflation and crowded positioning in some of the region’s markets.
But the latest oil driven sell-off has cleaned up some of the technical positioning and enhanced the attractiveness of certain markets such as Korea, according to Barclays Capital strategists.
Foreign investors were net buyers for a second straight day in the stock market, the strongest since January.
“The return of foreign investors has given the market significant support. However, buying appears to be short-covering to close short position for now,” said Kwak Joong-bo, a market analyst at Samsung Securities.
In credit, the benchmark for non-Japan Asia, the iTraxx investment grade index saw its spreads tighten by 3 bps to 105/107, reflecting the broader demand for risky assets.
Gains in stocks diminished the safe-haven appeal for gold and US Treasuries with two-year debt yields rising by as much as eight basis points to 0.77%.
In currency markets, the euro paused after a sharp rally overnight after the European Central bank signalled an interest rate hike as early as April.
The single currency jumped to a near four-month highs of $1.3976 and last traded at $1.3961. Against the yen, the euro hit four-month highs at 115.17 and last stood at 114.94.
“We see scope for rates to go up significantly further this year, beyond the hike now widely expected in April,” said Kenneth Wattret, analyst at BNP Paribas.
The pull back in oil and hawkish rhetoric from the ECB forced spot gold to snap a four-day rally. Silver fell more than a%.
Asian currencies were generally higher after the Beijing set a record high mid-point for the second day indicating authorities were using the yuan to help fight high inflation.