Asian stocks edge higher before China data amid US dollar weakness

An electronic stock information board displaying zero numbers on the latest stock prices in Shanghai, China on Feb 15, 2016.
An electronic stock information board displaying zero numbers on the latest stock prices in Shanghai, China on Feb 15, 2016.PHOTO: REUTERS

WELLINGTON (BLOOMBERG) - Asian stocks rose to a one-week high on Wednesday (Oct 19) ahead of key Chinese economic data, while the dollar held declines and crude oil rallied.

The MSCI Asia Pacific Index advanced, after posting its biggest gain in almost four weeks on Tuesday, before reports on Chinese economic growth, retail sales and factory output.

A gauge of the greenback's strength held near its lowest level in more than a week as South Korea's won appreciated with the Australian dollar.

The probability of the Federal Reserve raising interest rates by the end of the year declined by about three percentage points on Tuesday as a report showed US consumer prices excluding food and fuel costs rose less than forecast last month. Weakness in the global economy, including evidence of slackening growth in China, kept the Fed from tightening monetary policy in the first half of 2016 and Wednesday data are forecast to show expansion stabilized in Asia's biggest economy during the last quarter.

"Markets have taken the view that steady US core inflation will allow the Fed to maintain a snail-like pace of monetary tightening beyond the expected rate cut in December," Ric Spooner, chief market analyst in Sydney at CMC Markets, said in an e-mail. "Traders are weighing the odds of missing a recovery led by solid US profit reports and a recovery in bond prices against the risks of disappointing data from China."

The MSCI Asia Pacific Index added 0.1 per cent as of 9:25am Tokyo time, after climbing 0.9 per cent in the last session. Australian shares led gains among markets open for trading, with the S&P/ASX 200 Index advancing 0.3 per cent.

Futures on Hong Kong's Hang Seng Index rose 0.2 per cent, while contracts on the S&P 500 Index were little changed. The US benchmark climbed 0.6 per cent from a one-month low in the last session.

Goldman Sachs gained 2.2 per cent on Tuesday after posting a 47 per cent increase in earnings, while Netflix surged 19 per cent after reporting a jump in subscribers that alleviated concern about slowing growth. International Business Machines (IBM) slipped the most since June after saying that profit margins shrank for the fourth quarter in a row.

While only 57 S&P 500 members have reported results so far, 83 per cent announced earnings that exceeded analysts' estimates, with expectations on sales beaten for 68 per cent of companies, according to data compiled by Bloomberg.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed on Wednesday after slipping 0.5 per cent over the last two days. The gauge retreated this year amid speculation mixed economic data and political risks would limit the Fed's ability to tighten monetary policy. The losses had narrowed in recent weeks on speculation the central bank was getting closer to its first rate hike since December, prompting hedge funds and money managers to boost net bullish bets.

The Aussie - regarded as a bellwether for China, Australia's biggest trading partner - added 0.2 per cent in a sixth day of gains. The won rose 0.5 per cent.

"I'd suggest the Chinese GDP figure out later today will have a high six figure in it, above market expectations," Matthew Sherwood, head of investment strategy in Sydney at Perpetual Ltd, which manages about US$21 billion, told Bloomberg Radio. "Premier Li said the economy had performed above expectations in the September quarter so there is the chance that growth might even have a seven handle in front of it."

West Texas Intermediate crude climbed 1 per cent to US$50.80 a barrel after rallying 0.7 per cent on Tuesday.

US oil stockpiles dropped by 3.8 million barrels last week, the American Petroleum Institute was said to have reported. Analysts surveyed by Bloomberg forecast official data on Wednesday would show an increase in supplies. Oil has risen about 14 per cent since Opec reached a deal to manage supply last month, and prices have closed above US$50 for six of the past eight sessions as investors await a November meeting where the group is due to implement the agreement.