Oil, metals rally supports Asian stocks, dollar steady

SYDNEY (Reuters): A rally in commodities prices to multi-year peaks pushed resource-linked stocks and currencies higher in Asia on Wednesday, as bullish views on Chinese demand helped copper while supply concerns propped up oil.

A recovery in regional suppliers of Apple’s iPhone following losses earlier in the week also helped Asian markets.

Trading was generally thin across the board in a holiday-shortened week. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2% to its highest since late November.

For the year so far, the index has added about 32%.

A gauge of world shares traded near record highs, after gaining in every single month this year.

Copper skyrocketed to a 3-1/2 year peak on expectations of strong demand from China while oil hovered near its highest since mid-2015 on supply fears.

“If one is holding a long position in Brent, US crude, heating oil, copper, aluminium or silver, or exposed to these commodities through equity then your Christmas has just been extended a little longer,” said Chris Weston, Melbourne-based chief market strategist at IG.

US crude touched $60 a barrel after armed assailants blew up a pipeline pumping crude oil to the port of Es Sider on Tuesday.

Brent crude, the international benchmark for oil prices, gave back its gains on Wednesday to trade at $66.63 a barrel. US crude was off 18 cents at $59.79 after going as far as $60.01. Australian shares advanced 0.2% to a near decade high, with materials and energy sectors leading gains.

Mining giant BHP Billiton was among the top gainers on the index, followed by Woodside Petroleum and gold miner Newcrest.

Gold stayed within a striking distance of a near 4-week peak at 1,282 an ounce, while copper rocketed for a ninth straight session to $7,210.

“My sense is that the rally in copper supports expectations that 2018 is going to be a strong year for synchronised global growth,” said Greg McKenna, chief strategist at AxiTrader.

The gains in oil and metals overnight helped Asian stocks overcome Tuesday losses on Wall Street, which was led by a tumble in Apple Inc following a report about weaker demand for iPhone X.

Asian suppliers of iPhone, which slid on the report this week, recouped losses on Wednesday with Genius Electronic Optical Co Ltd Pegatron Corp and Hon Hai all higher. Apple Inc’s rival Samsung Electronics rose 1%.

Currencies

In forex markets, trading was thin with most major currencies muted. The euro held at $1.1860 and the dollar was barely changed at 113.26 yen.

Australia’s resource dependent currency hit a two-month high, becoming one of the best performing major currencies this year along with the euro and the British pound.

For the year, the dollar index, which measures the greenback against other major currencies, is seen ending about 9% lower. It is down about 3% on the yen.

Several economists have predicted the return of inflationary pressures in 2018, which would help global central banks wind down years of super-easy policies and hike interest rates.

The US Federal Reserve raised rates three times this year and is set to deliver further hikes in 2018. The European Central Bank is expected to finally begin clawing back its monetary stimulus and tighten policy after keeping the deposit rate below zero since 2014.

“I do think the commodity trade is one we need to watch,” IG’s Weston added.

“This is an asset class that is hot at the moment and could really dictate inflationary trends in 2018, where inflation, volatility and the US dollar hold the key to the capital markets.”