Asia shares scale 7-month highs as oil nears US$70 on tight supply

Chinese investors watch an electronic board showing the stock prices at a securities brokerage house in Beijing, China, on March 20, 2019.
Chinese investors watch an electronic board showing the stock prices at a securities brokerage house in Beijing, China, on March 20, 2019.PHOTO: EPA-EFE

SHANGHAI (REUTERS) - Asian shares rose to seven-month highs on Wednesday (April 3) as investors lapped up signs of progress in US-China trade talks and brisk economic data, while oil approached the key US$70 per barrel mark.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.5 per cent around 0310 GMT, after earlier touching its highest level since late August.

The index has risen nearly 3 per cent since Thursday following reports of progress in trade talks between the United States and China, as well as reassuring factory activity data from China and the US

The run of gains for stock markets worldwide has also pushed MSCI's key gauge of global equities to a six-month high. The global index was up 0.2 per cent on Wednesday morning.

Hopes for a deal to end the trade war between the world's two largest economies were fanned by fresh comments from White House economic adviser Larry Kudlow that Washington expects "to make more headway" in talks this week.

Even so, analysts struggled to point to a clear catalyst for the extended rally in equities.

"I think there's a tendency for markets at times to just want to be positive unless you hit them repeatedly, and not just with bad news, but with new bad news," said Rob Carnell, chief economist and head of Asia-Pacific research at ING in Singapore.

"There's been an awful lot of bad news priced in. So perhaps the absence of new negatives are enough to allow for a small sense of positivity to creep in," he said.

Australian shares were up 0.5 per cent, and Japan's Nikkei stock index added 0.8 per cent. Chinese blue-chips were flat, while Hong Kong's Hang Seng index added 0.7 per cent.

On Tuesday, the Dow Jones Industrial Average fell 0.3 per cent to 26,179.13 points, the S&P 500 was flat and the Nasdaq Composite added 0.25 per cent to 7,848.69.

"After such a strong rise it is no surprise that the risk rally stalled a little," said Greg McKenna, strategist at McKenna Macro, in a morning note to clients.

But after a brief consolidation in risk sentiment, US Treasury yields were once again ticking higher.

Benchmark 10-year Treasury notes yielded 2.5027 per cent, up from a US close of 2.479 per cent on Tuesday, and the two-year yield touched 2.3240 per cent compared with a US close of 2.308 per cent.

Oil prices also stood near multi-month highs amid concerns about supply, with Brent crude rising as much as 0.72 per cent to US$69.87 per barrel, its highest since November and near the psychologically important level of US$70 per barrel.

It was last up 0.55 per cent at US$69.75. US West Texas Intermediate (WTI) crude rose 0.42 per cent to US$62.84 per barrel.

News that the United States is considering more sanctions against Iran, the fourth-largest producer in the Organization of the Petroleum Exporting Countries (Opec), and the halting of production at a crude terminal in Venezuela threatened to squeeze supply and pushed oil prices up on Tuesday.

In currency markets, the pound was about 0.1 per cent higher at US$1.3139, having recovered its footing after British Prime Minister Theresa May said she would seek another delay to Brexit to work out an European Union divorce deal with opposition Labour leader Jeremy Corbyn.

The dollar strengthened 0.15 per cent against the yen to 111.48 and the euro added 0.17 per cent to buy US$1.1221.

The dollar index, which tracks the greenback against a basket of six major rivals, eased 0.16 per cent to 97.206.

Cryptocurrency bitcoin, which surged 18.7 per cent on Tuesday following a major order by an anonymous buyer, extended its gains by another 2.6 per cent to US$5,027.10.

Gold was flat, with spot gold trading at US$1,292.67 per ounce.