OPEC meeting in focus
HONG KONG: Asian markets rose Thursday as traders welcomed indications from the Federal Reserve that interest rates could rise next month, while oil prices rallied ahead of an expected extension to output cuts.
Minutes from the Fed’s May policy meeting showed board members thought that if jobs growth remains healthy with a rebound in investment and consumer spending then rates could rise “soon”, which many took to mean June.
While the economy has shown some signs of weakness, the bank still thinks its broad strength would justify winding down its balance sheet, essentially sucking cash out of the system and putting upward pressure on borrowing costs.
The news helped propel Wall Street to a fifth-straight day of gains, with the S&P 500 hitting another record, as the sharp losses suffered last week were reversed.
Global markets tumbled in the middle of last week on fears that crises engulfing Donald Trump could hit his economy-boosting agenda.
On Thursday the Nikkei in Tokyo ended the morning session 0.5 percent higher, while Sydney put on 0.4 percent.
Shanghai jumped 1.4 percent as dealers brushed off a cut in China’s debt rating Wednesday by Moody’s, with speculation state-backed funds were supporting the market.
Hong Kong added 0.8 percent to put it on course for a fourth-straight gain, with the city’s finance minister hitting out at Moody’s decision to also downgrade the city, citing increasingly closer economic links with the mainland.
Seoul jumped 1.1 percent to a fresh record after the South Korean central bank kept interest rates on hold citing an improving economy. Singapore, Taipei and Wellington also posted healthy gains.
Traders are now looking ahead to a meeting Thursday of the OPEC oil cartel at which it, along with key producer Russia, is expected to announce an extension of up to nine months —possibly 12—to an output cut.
The agreement—which came into force on January 1—sent prices surging when it was unveiled in November in a bid to address a global supply glut.
“The market is waiting for the outcome of the meeting; it’s clearly going to have an impact,” Michael McCarthy, a chief market strategist at CMC Markets in Sydney, told Bloomberg News. “The agreement has been remarkable with the discipline showed by participants so far. In that respect, it’s been a success.”
Crude prices, which dipped slightly Wednesday on profit-taking despite a drop in US inventories, were comfortably higher in Asia.
In early European trade London rose 0.2 percent while Paris and Frankfurt each added 0.4 percent.