Asian stocks climb on Fed outlook as Saudis torpedo oil's rally, STI up 0.2%

A woman walking past an electronic board of the Korea Composite Stock Price Index at the Korea Exchange in Seoul, South Korea on Jan 20, 2016.
A woman walking past an electronic board of the Korea Composite Stock Price Index at the Korea Exchange in Seoul, South Korea on Jan 20, 2016. PHOTO: REUTERS

WELLINGTON (BLOOMBERG) - Asian stocks rose on Monday (April 4), while the US dollar languished, as investors maintained bets the Federal Reserve will proceed cautiously on raising interest rates, even as data shows the world's biggest economy is strengthening. Oil slid after Saudi Arabia backed away from a commitment to freeze crude output.

The Asian equity benchmark rebounded from its worst day since mid-February as the Korean won dominated the greenback in Asia after strong manufacturing and jobs figures failed to alter expectations on the outlook for Fed rate hikes. Japanese shares snapped a four-day slide even as the yen held near an almost two- week high.

Crude extended last session's tumble, which wiped out its 2016 gains, after Saudi Arabia's deputy crown prince said the kingdom will only arrest production if Iran and other major suppliers also do so.

The MSCI Asia Pacific Index added 0.5 per cent as of 9:29 am Tokyo time, after sliding 2.3 per cent on Friday. Japan's Topix index climbed 0.3 per cent, while Australia's S&P/ASX 200 Index rose 0.2 per. The Kospi index in Seoul swung between gains and losses.

Singapore's Straits Times Index was up 0.19 per cent at 2,823.87 as of 9:16am.

Markets in mainland China, Hong Kong and Taiwan are shut for holidays.

Odds of the Fed hiking rates by November held around 50 per cent, even as data showed US manufacturing expanded for the first time in seven months and more workers than expected were added to nonfarm payrolls last month, while an increase in the number of people looking for work saw the jobless rate tick up. Risk assets have rallied amid a pullback in the dollar the past few weeks after the Fed reduced its outlook for rate rises this year to two from four. The chance of a hike at the central bank's next meeting fell to zero after Chair Janet Yellen reaffirmed the go-slow approach in a speech last week.

"With Yellen cautious, markets are taking her at her word - for the time being at least," Philip Borkin, a senior economist in Auckland at ANZ Bank New Zealand, said in a client note. "But domestic developments can't be ignored for ever, and the data means the Fed is going to have to at least contemplate further tightening at some stage in the not-to- distant future. Love for the dollar should eventually return, although it may be a few months away yet."

Futures on the Standard & Poor's 500 Index lost 0.1 per cent early Monday, following a 0.6 percent increase in the gauge at the end of last week.

Payrolls in the US grew by 215,000 workers last month, more than the 205,000 predicted by economists, and February's increase was revised to 245,000. The unemployment rate rose to 5 percent from 4.9 per cent, according to the government data.

"Friday's US labor market report was something of a middling result for markets," ANZ's Borkin said. "On the one hand it was not really strong enough to suggest inflation pressures are going to run away on the Fed, but on the other, it certainly still showed, together with a rebound in the ISM, that the economy is still performing well overall."

West Texas Intermediate crude slumped 0.9 per cent to US$36.45 a barrel on Monday, extending Friday's 4 per cent tumble. Brent was down 0.7 per cent to US$38.42 after losing 4.1 per cent.

Middle Eastern equities slid on Sunday, with shares in Saudi Arabia dropping to a five-week low, after Mohammed bin Salman, who has emerged as a leading political force in the country, challenged its main regional rival to take an active role in stabilizing the crude market. Iran has already said it plans to boost its production after the lifting of sanctions following a deal to curb the country's nuclear program.

"If all countries agree to freeze production, we're ready," bin Salman said in an interview with Bloomberg. "If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door."