Asia report: Stocks joint global rally after oil price fall

Stock markets in Asia joined a global rally to close well into positive territory on Thursday, after a fall in oil prices fuelled by reports the United Arab Emirates had called for Middle East oil producers to increase supply.

In Japan, the Nikkei 225 was up 3.94% at 25,690.40, as the yen weakened 0.13% against the dollar to last trade at JPY 115.98.

It was a day of gains for the benchmark’s major components, with robotics specialist Fanuc up 4.14%, Uniqlo owner Fast Retailing adding 2.42%, and technology investor SoftBank Group rising 3.11%.

The broader Topix index was 4.04% firmer by the end of trading in Tokyo, closing at 1,830.03.

On the mainland, the Shanghai Composite was ahead 1.22% at 3,296.09, and the smaller, technology-centric Shenzhen Composite rose 2.12% to 2,160.94.

South Korea’s Kospi was 2.21% higher at 2,680.32, while the Hang Seng Index in Hong Kong advanced 1.27% to 20.890.26.

Chinese electric car maker Nio launched its secondary listing in the special administrative region on Thursday, with its shares initially surging, before giving up most of their gains to close 0.82% higher than their issue price.

Seoul’s markets were returning from a day off for presidential elections, meanwhile, which saw conservative opposition candidate Yoon Suk-yeol claim victory.

The blue-chip technology stocks were on the front foot on the Korean peninsula, with Samsung Electronics up 2.45%, and SK Hynix ahead 1.69%.

Oil prices were rising again as the region went to bed, with Brent crude futures last up 4.84% on ICE at $116.52, and West Texas Intermediate ahead 3.96% at $113 per barrel.

Prices tumbled as much as 17% on Wednesday, after the Emirates ambassador to Washington stated that the country would be pushing its partners to increase output.

“We favour production increases and will be encouraging OPEC to consider higher production levels,” Yousus Al Otaiba said in the tweeted statement.

That was later rebuffed by UAE energy minister Suhail al-Mazrouei, however, who said the country was committed to OPEC’s current monthly output levels.

“Indeed, the oil price dropped by as much as 17% overnight before staging a small recovery, following reports that the United Arab Emirates would support an increase of oil output via its membership of OPEC,” said Interactive Investor head of markets Richard Hunter.

“Despite the drop, the oil price remains up by 47% in the year to date, mitigating but not eliminating the additional inflationary concerns which the spike has prompted.”

Naeem Aslam, chief market analyst at AvaTrade, said traders were still in a “cautionary mode”, with no clarity on whether the current change in momentum or shift in the direction of the oil trend would last.

“The current bounce in the equity markets may likely turn out to be nothing but a dead cat bounce as the actual fundamentals which drove the global stock markets to their knees haven't changed,” Aslam noted.

“For instance, Russia is still increasing the intensity of its attack on Ukraine, and there are no signs of Russia removing its military from Ukrainian land.

“The sanctions imposed on Russia by the US and its allies are still there, and once again, there is no clarity on when the current sanctions will be lifted off on Russia.”

Aslam also pointed out that stagflation remained an issue, keeping traders up at night as economic data out of Europe, Asia and the US had started to show weakness while inflation remained “very much anchored” in place.

In Australia, the S&P/ASX 200 was 1.1% higher at 7,130.80, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was up 1.2% at 11,926.26.

The down under dollars were both stronger on the greenback, with the Aussie last ahead 0.15% at AUD 1.3638, and the Kiwi advancing 0.11% to NZD 1.4601.