HONG KONG, RAW – Asian shares have rallied, taking heart from a late recovery on Wall Street after US politicians appeared close to a temporary deal to avert a federal debt default.
Elsewhere, Russia reassured Europe on gas supplies, calming volatile markets.
Oil prices also dropped back from multi-year highs of a day earlier, having been a major contributor to this week’s equities sell off, while US benchmark Treasury yields and major currencies steadied amid the calmer mood.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.25 per cent in early trade, regaining ground lost in recent days to be little changed on the week.
“Sharp increases in energy prices have clearly contributed to the latest leg up in bond yields, which has been accompanied by weakness in equity markets around the world,” analysts at Capital Economics wrote in a note.
As oil prices came off on Thursday, there were gains in share benchmarks in Korea up 1.3 per cent, Australia up 0.64 per cent, and Hong Kong up two per cent.
Japan’s Nikkei rose 0.89 per cent, and US stock futures, the S&P 500 e-minis, gained 0.42 per cent.
Chinese markets remained closed for a holiday.
US crude dipped 0.34 per cent to $US77.17 a barrel, extending a fall from late on Wednesday after hitting a seven-year high of $US79.78 earlier that day.
Brent crude was steady at $US81.04 per barrel, off its three-year high of $US83.47 also hit on Wednesday.
The falls followed an unexpected rise in US crude stocks.
Gas prices also fell, a day after Russian leaders indicated supply to Europe could increase, contributing to a late rally on Wall Street after declines in European stock markets.
The Dow Jones Industrial Average rose 0.3 per cent, the S&P 500 gained 0.41 per cent and the Nasdaq Composite added 0.47 per cent, also boosted by a proposal from senior Senate Republican Mitch McConnell to allow an extension of the federal debt ceiling into December.
Worries the US would default on its debt have weighed on stocks along with rising energy prices.
The next US event in focus for global investors is payrolls data due on Friday, with investors anticipating a reasonable figure will mean the US Federal Reserve will begin tapering its massive stimulus program at its November meeting.
The US dollar was steady against a basket of currencies, and held at a 14-month high against the Euro.
The yield on benchmark 10-year Treasury notes was 1.5415 per cent off from Wednesday’s three-and-a-half month high of 1.573 per cent.
“Sentiment and momentum are variable, causing shifting risk appetite,” wrote Westpac analysts of US rates.
“Price action is linked to equity market gyrations, a hawkish Fed outlook and fears of stagflation as oil surges and the politics around the debt ceiling threaten the domestic economy.”
Spot gold was little changed, trading at $US1761.89 per ounce.