Asian Shares Gain as Crude Oil Bounce Boosts Risk Assets

Asian markets rose, tracking the gains in crude oil prices, on hopes that big producers will cap production.

• MSCI Asia Pacific index up 1.4 percent, Nikkei up more than 2 percent
  
• Oil boosted as Iran voices support for output freeze
  
• Dollar dips vs yen and euro after Fed Bullard’s dovish comments
  

Asian stocks rose across the board on Thursday as crude oil extended gains on hopes that big producers will cap production, improving investor sentiment for riskier assets.

Crude oil remained the main market driver. US crude was up 1.7 percent at $31.19 a barrel following a 7 percent jump on Wednesday after Iran voiced support for a Russia-Saudi-led move to freeze production to deal with the market glut that had pushed prices to 12-year lows.

While there has been some confusion as to whether ‘support’ equals action, oil traders are simply relieved that the world’s fourth-largest holder of oil reserves is willing to cooperate.

Kathy Lien, Managing Director-FX strategy, BK Asset Management

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.4 percent, pulling further away from a three-week low struck last week when a widespread chill in risk appetite amid euro zone banking sector concerns depressed equities globally.

Japan’s Nikkei continued its recovery from last week’s 16-month low and gained more than 2 percent, shrugging off the biggest drop in domestic exports since 2009. Shanghai stocks rose 0.3 percent, in muted reaction to data showing China’s January consumer inflation quickening to 1.8 percent from the previous year. South Korea’s KOSPI added 1 percent.

“Recovering oil prices have set the stage for an accelerated rebound in global stocks, while minutes from the FOMC supported the mood,” said Rhoo Yong-seok, a stock analyst at Hyundai Securities.

Minutes of the January Federal Open Market Committee (FOMC) meeting released on Wednesday showed that policymakers worried about tighter global financial conditions hitting the U.S. economy and considered changing their planned path of interest rate hikes in 2016.

In currencies, the greenback dipped against the yen and euro on dovish comments from a top Fed official.

It would be “unwise” for the central bank to continue hiking rates given declining inflation expectations and recent equity market volatility, St. Louis Fed President James Bullard said late on Wednesday in comments that mark a stark change of direction for one of the Fed’s more hawkish inflation foes.

The dollar edged down 0.2 percent to 113.85 yen. The euro nudged up 0.1 percent to $1.1142.