Asian stocks mostly joined a global rally yesterday with a surge in oil prices providing some much-needed confidence as key producer Iran praised an output freeze by Saudi Arabia and Russia.
Crude, which last week flirted with 13-year lows, extended a surge that began on Friday as dealers grow hopeful of an easing to the overproduction and supply glut that has hammered the commodity for a year and a half.
Federal Reserve’s latest policy meeting which indicated the bank is unlikely to press on with further interest rate cuts any time soon also provided support to beleaguered markets.
Oil prices jumped on Wednesday after Iranian oil minister Bijan Zanganeh welcomed the pact between top two producers Russia and Saudi Arabia to pursue a coordinated strategy to limit output.
While he stopped short of committing Iran to any production curbs, his comments were taken as a step in the right direction.
On Wednesday, US benchmark West Texas Intermediate soared more than 7% while Brent added 5.6%. And yesterday, WTI added 1.7% while Brent was 0.4% higher.
The black gold has rocketed since Friday when rumours of the Saudi-Russia deal emerged.
“The risk of continued supply growth and potential ballooning of inventories is diminishing slightly,” Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group in Sydney, told Bloomberg News.
Energy firms were pumped up in Asia, with Sydney-listed Woodside Petroleum up 4.6%, BHP Billiton was more than 6% higher, while CNOOC was 5.4% higher in Hong Kong and PetroChina added 6%.
On broader stock markets, Tokyo ended 2.3% higher, while Hong Kong and Sydney also finished 2.3% up. Seoul ended the day 1.3% higher.
“The storm is blowing over and markets are stabilising,” Mitsushige Akino, executive officer at Ichiyoshi Asset Management, told Bloomberg News.
“Declines in oil had been weighing on risk sentiment, so it’s a positive sign that prices are rebounding.”
Traders appeared to shrug off figures earlier yesterday that showed Japan fell back into a trade deficit in January as exports to China plunged.
However, Chinese stocks closed slightly lower yesterday, ending two days of gains as tepid inflation figures in January failed to boost the market, dealers said.
Shanghai slipped 0.16%, after a more-than-four per cent jump in the previous two sessions fuelled by hopes for economy-boosting measures by China’s government.
Data showed inflation hit 1.8% last month, up marginally from December’s 1.6% increase, but analysts warned against being too optimistic with many structural problems still in place. US and European stocks provided a firm platform from their Asian counterparts, with the Fed minutes also tempering concerns about any possible tightening this year.
The minutes showed policymakers were worried about the impact of recent world market gyrations on the US economy and that they would closely follow events when deciding on whether to hike rates again.
The string of upbeat news led analysts to suggest the turmoil that has blown through trading floors from Asia to the Americas may be coming to an end.
“The Fed minutes show that it does look like they’re gearing up for a slower rate hike path, which is good” for higher-risk assets, Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors, said.
“I think this rally has further to go, with the conditions set for the rebound to continue for a little while.”