Asian shares rose on Monday, extending an October rally, as investors hunted for bargains in industrials and basic materials, fueled by a rebound in commodities while the dollar struggled as hopes of a Fed rate rise this year faded.
European stocks were seen consolidating gains on Monday after a stellar week, with spreadbetters expecting Britain’s FTSE 100 .FTSE to open down 0.3 percent. Germany’s DAX .GDAXI was seen opening up 0.1 percent higher while France’s CAC 40 .FCHI was seen down 0.1 percent lower.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.6 percent, extending an impressive 11 percent rise this month as investors unwound some of their long U.S. dollar and short commodities and emerging markets trades.
China shares jumped over 3 percent on Monday to their highest level in seven weeks after the central bank took fresh steps to inject liquidity into the struggling economy and said the stock market’s correction “is almost over”.
“Any signs of stimulus is being seized by the markets as a sign of stabilization and there is some bargain hunting, especially in the beaten down sectors, related to commodities,” said Nicholas Yeo, head of equities (China/Hong Kong) at Aberdeen Asset Management with assets under management of US$490.8 billion globally.
While Beijing has generally refrained from launching widespread stimulus measures to boost slowing growth, it has resorted to a steady drip-feed of measures in recent weeks to support various sectors ranging from housing to autos, calming investor sentiment, and sparking a rally in the Hong Kong listed shares of Chinese companies.
In a sign that the sentiment towards emerging markets may have turned a corner, the much-tracked Bank of America Merrill Lynch fund flow report showed that weekly outflows from emerging market funds were at their lowest since July.
The widely-tracked VIX index .VIX, a volatility gauge of investor nervousness, was at its lowest since late August, a sign that optimism was returning to the markets after a tumultuous summer in which major indexes lost more than a quarter of their value.
On Wall Street, major indexes .DJI .SPX closed slightly higher on Friday, chalking up their best weekly performances this year. S&P 500 e-mini futures ESc1 was broadly flat in Asian trading on Monday.
An unexpectedly weak U.S. jobs report for September had led many investors to speculate that the Fed will not deliver its first hike since 2006 this year. Indeed, fed fund futures contracts <0#FF:> were indicating a rate hike only in 2016.
In currency markets, the dollar struggled against a basket of currencies .DXY on the growing concern the Fed may not raise rates until next year, triggering some unwinding of positions.
Strategists at Brown Brothers Harriman warned that technical levels warned of scope for additional dollar losses in coming sessions. The index was trading below 95, its lowest levels in a month, according to Thomson Reuters data.
In commodities, oil prices added to recent gains on Monday after U.S. drillers cut the number of working oil rigs for six straight weeks, while traders awaited Chinese trade data. [O/R]
U.S. West Texas Intermediate crude futures CLc1 were trading at $49.93 per barrel, up 0.6 percent. Brent futures LCOc1 were up 0.4 percent at $52.84 a barrel.
Industrial metals such as copper and zinc got some much needed respite, posting impressive gains last week.
The 19-commodity Thomson Reuters/Core Commodity CRB Index .TRJCRB rose to its highest level since end-July.