Asian shares rise after commodities rebound; dollar regains lost ground

Asian stocks mostly edged up on Thursday after a significant rebound in oil and copper prices brought a semblance of calm, while the dollar regained the ground lost on disappointing US retail sales.

Spreadbetters saw the upward momentum for risk assets being retained in Europe, forecasting Britain’s FTSE to open up by as much as 0.5 per cent and Germany’s DAX and France’s CAC both seen starting 0.6 per cent higher.

Indian equities rally

Indian stocks rallied after the Reserve Bank of India yielded to signs of slowing inflation and delivered a surprise interest rate cut. The India NSE index rose 1.8 per cent.

Equity gains in much of the region were less spectacular as global growth worries lingered after weak US retail sales compounded concerns over an earlier plunge in copper prices.

Asia-Pacific shares

MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.1 per cent. Hong Kong’s Hang Seng rose 0.1 per cent and Japan's Nikkei bounced 1.3 per cent.

Stocks in Australia, heavily dependent on exports of natural resources, lost 0.4 per cent. South Korea’s KOSPI dropped 0.2 per cent.

“Consumers gain purchasing power when oil prices fall, but the fact that US retail sales fell in December despite cheap oil has highlighted a serious deflation risk,’’ said Chun Jung-hun, an analyst at Kiwoom Securities.

LME copper

Copper skidded to a 5-1/2-year low on Wednesday as the recent decline in oil prices amplified fears about the state of the global economy. The industrial metal is generally considered a barometer of world demand.

After plunging 5.3 per cent overnight, benchmark LME copper rose 1.3 per cent to $5,622 a tonne.

US retail sales

Wednesday’s data from the United States further capped the risk appetite, with investors already feeling a chill from the World Bank’s downgrade of its 2015 and 2016 economic forecasts.

US retail sales recorded their largest decline in 11 months in December as demand fell almost across the board, tempering expectations for a sharp acceleration in consumer spending in the fourth quarter.

Crude oil

Oil prices retained a bulk of their gains after rebounding from near six-year lows overnight as traders turned away from bearish bets stoked by a global supply glut to cover expiring options.

US crude was down 0.9 per cent at $48.06 a barrel after surging nearly six percent overnight.

The technical nature of the rebound in oil prices kept markets cautious about the outlook.

“The question is whether the market sees the current decline as overdone and is now establishing a bottom or is resetting and will go again,’’ Evan Lucas, market strategist at IG in Melbourne, said in note to clients.

“I see the latter as the most likely scenario — the oil rout is far from over and it looks to me like a dead cat bounce.’’

US Treasury yields

In currencies, the dollar nursed losses after the weaker-than-expected US retail sales data pulled US Treasury yields sharply lower on Wednesday.

The dollar crawled up 0.3 per cent to 117.72 yen after going as low as 116.06 overnight, its lowest in a month.

Giving the dollar a bit of respite, the benchmark 10-year Treasury yield was at 1.8758 per cent after touching a 20-month trough of 1.7840 per cent.

The disappointing US data led the market to push further out the day when the Federal Reserve is likely to deliver its first interest rate increase, which many analysts had suspected could come in June.

The euro fetched $1.1775, limping away from a nine-year low of $1.1728.