China stocks lead Asia rally while US futures fall on Fed, STI up 0.8%

WELINGTON (BLOOMBERG) - Chinese shares rallied ON MONDAY (OCT 12), helping a gauge of Asian shares extend its biggest weekly gain in almost four years. Malaysia's ringgit retreated with US equity-index futures after Federal Reserve vice chairman Stanley Fischer said there's potential for US interest-rate to rise by year end.

The Hang Seng China Enterprises Index advanced 1.7 per cent by 10:18 am in Hong Kong, helping to drive the MSCI Emerging Markets Index higher by 0.6 per cent. The Shanghai Composite Index rose 1.6 per cent to trade about 10 per cent above its recent lows. Property and material shares jumped after premier Li Keqiang said the nation will increase fiscal support for shantytown redevelopment.

Singapore's Straits Times Index was trading up 0.8 per cent at 3,022.42 as of 12:09 pm.

The S&P/ASX 200 Index dropped 0.7 per cent in Sydney, after posting its steepest weekly advance since 2011. New Zealand's S&P/NZX 50 Index climbed 0.7 per cent, while the Kospi index in Seoul added 0.5 per cent.

Malaysia's ringgit lost 1.2 per cent. The currency jumped 6.9 per cent last week, the most since 1998, only beaten in Asia by the Indonesian rupiah, which surged 9.2 per cent.

Mr Fischer said Sunday that while the US economy may be strong enough to withstand a rate increase by the end of 2015, policy makers are monitoring laboUr conditions and the situation internationally as they mull when to pull the trigger. Riskier assets surged last week as the Fed's caution, combined with evidence of slowing growth in other major economies, spurred speculation that central banks globally won't be able to rein in stimulus any time soon.

"If the Fed does decide to hike in October or December then the US dollar is at risk of appreciating," said Janu Chan, a senior economist in Sydney at St George Bank, a division of Westpac Banking Corp. "Markets are still putting a low probability of a rate hike this year."

Mr Fischer joined other Fed officials, including chair Janet Yellen, in raising the prospect of policy tightening by the end of this year, with Atlanta Fed president Dennis Lockhart saying Friday that he still anticipates raising rates in 2015. Despite the rhetoric, traders put the odds of an increase this year at below 40 per cent, after weaker-than-expected September payrolls data fueled concern the labour market recovery is stalling.

More than US$3 trillion was added to the value of global shares last week as the MSCI All-Country World Index gained 4.4 per cent and a gauge Asia-Pacific stocks that includes Japan climbed 5.5 per cent. Both advances were the most since December 2011.

Standard & Poor's 500 Index futures lost 0.1 per cent to 2,005.50, falling with contracts on the Dow Jones Industrial Average and Nasdaq 100 Index. The S&P 500 ended Friday up 0.1 per cent, capping a weekly jump of 3.3 per cent, the best performance this year.

While acknowledging the volatility in markets due to uncertainty over when the Fed will move, Mr Fischer said the Fed needs to "remain cognizant of the risks ahead." He said that while the last two US payrolls reports have been disappointing, the job market's prospects for further improvement look good overall.

China will release export and consumer-price data on Tuesday and Wednesday, respectively. Overseas shipments probably dropped 6 per cent last month from a year earlier, while the inflation rate slowed to 1.8 per cent, according to the median estimates of Bloomberg surveys.

Data on US retail sales, prices and manufacturing is due out this week, with bond markets closed Monday for the Columbus Day holiday. Stocks in New York trade as normal.

While most commodities were steady following Friday's gains, West Texas Intermediate crude extended its advance, rising for a third day as speculation takes hold that an increase in demand will ease the global glut.

WTI added 0.6 per cent to US$49.92 a barrel, while Brent crude rose 0.4 per cent to US$52.85. Demand for the commodity will grow and non-OPEC supply is due to contract, Abdalla Salem El-Badri, the secretary-general of the Organization of Petroleum Exporting Countries said at a conference in Kuwait City on Sunday. Prices have bottomed and there are signs of a recovery in 2016, according to Qatar's Energy Minister Mohammed Al Sada.

Gold for immediate delivery was little changed at US$1,157.59 an ounce after climbing 1.5 per cent on Friday. Copper rose 0.2 per cent to US$5,307.50 a metric ton in London, following last session's 3.1 per cent surge, while nickel climbed a fifth straight day, increasing 1 per cent to US$10,600 a ton.

India updates on consumer prices Monday and reports on industrial production along with Malaysia. China may post loans data.