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Energy stocks up as oil eyes record; dollar weak

Energy stocks up as oil eyes record; dollar weak

Hong Kong/Tokyo, 11 September Asian energy stocks rose today after US crude came within a whisker of its record high, but ongoing concerns about the US economy kept a lid on markets and pinned the dollar near 15-year lows.

Underscoring worries about the health of Asia’s top export destination, Fed Governor Frederic Mishkin said the possibility that adverse effects of US financial market turmoil spreading beyond the housing sector posed an important downside risk to the US economy.

“With so much uncertainty still left, it’ll be hard to find a clear direction for markets this week," said Choo Hee-yeop, deputy general manager of asset management strategy at Korea Investment and Securities.

At 0240 GMT, MSCI’s measure of Asia Pacific stocks excluding Japan had risen around 0.8%, recovering from Monday’s 1.2% fall due to strength in energy shares.

Stock markets around the region found their footing, with Tokyo’s Nikkei average inching up 0.3% by midsession, recuperating from a 2.2 percent tumble on Monday.

Australia’s S&P/ASX index edged up 0.6%, while Hong Kong’s Hang Seng Index rose 0.7%. Taiwan’s main TAIEX share index rose around 0.9%.

Data eyed

China stocks dipped as data showed annual consumer inflation soared to a 10-year high of 6.5% in August, raising concerns about the need for additional monetary tightening, perhaps as soon as next month, analysts said.

In Japan, data released just before the market open showed core private-sector machinery orders, a key gauge of corporate capital spending, rose 17% in July from the previous month, beating the consensus forecast for a 5.3% rise.

This came a day after a disappointing report showing Japan’s economy contracted more than expected in the second quarter.

“The data shows that capital spending continues to be solid. However, one month’s data alone is not enough to lift uncertainty about the economy," said Masuhisa Kybayashi, chief JGB strategist at Barclays Capital.

Worries about the US economy also saw investors sold exporters such as Honda Motor and Canon Inc Japanese names were further pressured by the stronger yen.

But firmer oil prices supported energy stocks around the region.

US crude traded at $77.87 a barrel, within striking distance of the all-time high of $78.77 set on Aug.1 as OPEC prepared to meet on output policy and after attacks on crude and natural gas pipelines in US supplier Mexico.

Japan’s INPEX Holdings climbed nearly 3% and Australia’s oil and gas producer Woodside Petroleum, which said it was in talks with potential Asian buyers, added 0.5 %. MSCI’s index of Asia Pacific energy stocks put on 0.8 %.

Dollar weak

The dollar hovered just above at 15-year low against a basket of currencies at 79.867, near Monday’s trough of 79.788 -- a level last seen on September 1992.

Against the Japanese currency, it bought around 113.50 yen. The dollar has fallen from a high above 124 yen in June amid growing expectations that the Fed will cut its benchmark fed funds rate at the Sept. 18 meeting.

Data on 31 August an unexpected drop in US non-farm payrolls last month further added to hopes of a bigger cut.

“The market has built a consensus that the jobs data has made it easier for the Fed to cut by 50 basis points, not 25 basis points as generally thought before the figures," said a senior dealer at a European bank.

The euro fetched $1.3790 slightly off an early high above $1.38 and it was also a touch lower at 156.65 yen

Among safe-haven plays, Japanese government bonds were little changed in early trade with the yield on the benchmark 10-year bond, near a 19-month low of 1.50% plumbed on Monday, 10 September, while spot gold kept a handle above the key $700 level, within sight of a 16-month high of $707.10 set on 31 August. REUTERS

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