Stocks set for weekly gain, oil below $US100 a barrel
Asian stocks are poised for a second week of strong gains, with oil prices stabilized below US$100 per barrel ($A140); It was seen that investors were hopeful that a short-term solution would be found to the Middle East war.
Although the Strait of Hormuz, through which one-fifth of the world’s oil and gas supply passes, remains closed, investors have remained optimistic about any signs of results this month.
A 10-day ceasefire between Lebanon and Israel went into effect Thursday, and President Donald Trump said the next meeting between the United States and Iran could be held on the weekend when the current ceasefire expires.
This sent oil prices lower, with Brent crude futures falling more than 1.0 per cent to US$98.14 ($A137.04) per barrel. US West Texas Intermediate crude oil futures fell 1.6 per cent to US$93.15 ($A130.08) per barrel.
In stocks, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6 percent but remained near its highest level since March 2, the first trading day after the outbreak of the Iran war.
The index increased by 14.5 percent in April after falling 13.5 percent in March. Japan’s Nikkei index fell 0.9 percent in early trading after reaching a record high on Thursday. Almost all stock markets returned to levels before the outbreak of war by the end of February.
For Andrew Chorlton, CIO of public fixed income at M&G, the last two weeks have been surprising in how quickly markets have been willing to recover from the conflict and energy shock.
“There’s a pretty strong contrast between what policymakers and central bankers are saying about the risks posed by this (conflict) and what the market is implying,” he said.
“That seems somewhat satisfactory,” Chorlton added. “It seems unlikely that a risk premium in addition to growth or inflation will be priced in.”
The US dollar benefited from safe-haven flows in March but has since given up those gains. The euro was last traded at US$1.1779 ($A1.6448), just below the seven-week high it touched in the previous session.
The US benchmark S&P 500 and the tech-heavy Nasdaq posted modest gains for the second day in a row on Thursday, breaking record closing records.
“I think equity markets remain positive, helped by some strong US earnings, but – and this is a big but – we need to see some hard evidence that the peace will last,” said Nick Twidale, chief market strategist at ATFX Global.
“In my view, this means a full reopening of the Strait, otherwise we could see significant corrections in global equities in the coming days and weeks.”
The closure of the waterway caused the worst oil price shock in history and prompted the International Monetary Fund to lower its outlook for the global economy, warning that a protracted conflict could push the world to the brink of recession.
The dollar index, which measures the dollar’s value against a number of currencies including the yen and euro, was at 98.24, near its lowest level since March 2. The index had fallen for eight consecutive sessions through Wednesday.
The yen remained steady at 159.32 per dollar, while the risk-sensitive Australian dollar reached US$0.7163 ($A1.0003), approaching the four-year high it touched on Thursday.
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