Asian stocks rebound as oil rallies and US dollar retreats, STI up 0.8%

WELLINGTON (BLOOMBERG) - Asian shares rebounded from a six-week low on Friday (May 20) as oil rallied and the US dollar retreated against higher-yielding currencies.

Banking and technology stocks drove gains in the MSCI Asia Pacific Index, which was recovering from its steepest back-to- back losses in more than a month.

The MSCI Asia Pacific Index added 0.4 per cent as of 12:03 pm Tokyo time, rebounding from a six-week low. Hong Kong's Hang Seng Index gained 1.2 per cent, while benchmarks in China and Japan gained as much as 0.3 per cent. The Shanghai Composite Index was still down 0.4 per cent for the week, while the Topix has risen. Taiwan's Taiex rose 0.5 per cent.

In Singapore, the Straits Times Index was up 0.81 per cet at 2,762.29 as of 12:22 pm.

Futures on the S&P 500 clibd 0.3 per cent after the benchmark's 0.4 per cent drop on Thursday saw it erase gains for 2016. Contracts on the UK's FTSE 100 Index rallied 0.9 per cent.

Some US$900 billion was wiped of the value of global shares over the last three days as prospects for a June interest-rate increase in the US surged, spurred by comments from Federal Reserve officials, minutes of the last policy meeting and quickening inflation. Fed Funds futures put the odds of a move next month at 28 per cent, up from 4 per cent a week ago. Finance chiefs from the Group of Seven nations are meeting in Japan to discuss ways to tackle the worsening outlook for the global economy.

"Despite these intimations by the Fed, the market continues to remain skeptical over the likelihood of a rate hike in June or July," Angus Nicholson, a market analyst in Melbourne at IG Ltd, said in an e-mail to clients. "Market pricing for a June or July rate hike was trimmed slightly and the dollar index pulled back."

Crude oil rose 1.3 per cent to US$48.79 a barrel in New York, headed for a weekly advance of more than 5 per cent. US output slid for a 10th week to the lowest since September 2014 as gasoline use increased before a period of seasonal demand, the Energy Information Administration said on Wednesday.

"We've got US demand picking up and combining with bullish supply news filtering through the market," said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney. "Unless there is a clear new fundamental reason to buy oil, I think US$50 is a hard psychological level to break through."

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, held near its strongest level since March. The British pound was the only major currency to strengthen against the US currency this week, buoyed by polls indicating that the campaign to keep the UK inside the European Union is extending its lead before a referendum next month.