Asian shares rebound as Fed sentiment shifts, STI up 1.3%

A pedestrian stands in front of a quotation board flashing the Nikkei key index from the Tokyo Stock Exchange in Tokyo on May 13.
A pedestrian stands in front of a quotation board flashing the Nikkei key index from the Tokyo Stock Exchange in Tokyo on May 13.PHOTO: AFP

WELLINGTON (BLOOMBERG) - Asian stocks rebounded from a seven-week low, joining a rally in US and European shares as sentiment toward the prospect of higher American interest rates shifted, with investors focusing on evidence of strength in the world's biggest economy.

The US dollar maintained gains versus the yen, as crude oil rose with industrial metals.

Mounting conviction that the Federal Reserve will boost borrowing costs some time in the next two months preserved the greenback's gains against the euro and the yen, while the equity rally and crude rising for a second day boosted emerging-market currencies in South Korea and Malaysia. Shares in Japan and Australia led the Asian advance, with mining stocks driving gains as copper, nickel and aluminum climbed at least 0.1 per cent. Gold held losses following its longest selloff since November, while government debt fell.

The MSCI Asia Pacific Index added 0.9 per cent as of 9:27 am Tokyo time, rising for the third time in four days after sliding to its lowest level since April 6 on Tuesday. Japan's Topix index jumped 1.3 per cent, the most in two weeks, while Australia's S&P/ASX 200 Index rallied 1.6 per cent nd the Kospi index in Seoul advanced 0.9 per cents.

Singapore's Straits Times Index was up 1.26 per cent at 2,784.86 as of 10:06 am.

Futures on the S&P 500 climbed 0.1 percent following the US benchmark's 1.4 per cent surge last session, which was driven by gains of more than 1.5 per cent in financial stocks and technology shares.

In Hong Kong, futures on the Hang Seng and Hang Seng China Enterprises indexes climbed at least 1 per cent in most recent trading, as those on the FTSE China A50 Index were bid up 0.6 per cent.

After swinging around in the wake of the Fed's April meeting minutes, markets seem to have grown comfortable with the elevated odds of an imminent increase in US rates. Traders are now pricing in a better-than-even chance of the central bank boosting borrowing costs at its July meeting, with Fed officials lining up to indicate their willingness to support such a move, should the strength in the economy be sustained. Data on Tuesday showed purchases of new homes in the US surged in April to the highest level since the start of 2008. Investors will scrutinize comments from Fed Chair Janet Yellen later this week, as well as a key government jobs report due June 3.

"Strong US home sales have added credence to the Fed's claims that the US economy may be strong enough for another rate hike in June or July," said Angus Nicholson, a market analyst in Melbourne at IG Ltd. "Commodities have been remarkably buoyant overnight given the strong performance in the dollar."