Asia: Stocks rebound on Japan stimulus hopes, oil price recovery

Asia stocks rebounded on Friday as a recovery in oil prices and hopes of further stimulus from the Bank of Japan soothed markets.

Japan’s Nikkei 225 was the biggest riser at the close, up 5.88%, as the Japanese yen weakened about 1.4% to 118.03 against the US dollar in a lift to exporters.

Prime Minister Shinzo Abe’s aide on Thursday said that “conditions for additional easing have fallen into place”. The Bank of Japan meets on 28-29 January when it is expected to increase asset purchases.

Elsewhere, Hong Kong’s Hang Seng index rose 2.91% and the Shanghai Composite increased 1.27%.

Uplifting markets, oil prices moved back above the $30 per barrel level. Brent crude jumped 4.45 to $30.61 per barrel and West Texas Intermediate increased 3.5% to $30.63 per barrel at 0853 GMT.

European Central Bank President Mario Draghi on Thursday said in light of the recent falls in oil prices and its impact on inflation, the monetary authority would reconsider its monetary policy at its early March meeting when macroeconomic projections became available.

“Of course there is a risk that in being so dovish he could well be setting himself up for the similar sort of disappointment that characterised the December decision, given that the opposition to further cuts in the deposit rate and further stimulus are hardly likely to have dissipated by then,” said Michael Hewson, chief market analyst at CMC Markets.

“What is not in doubt is that the latest inflation projections are likely to show that inflation will take longer to return to target when they are published in March, but will they be enough to sway the doubters on the council to fall in line and back further action, if it is felt it is necessary.”

Meanwhile, China’s Vice President Li Yuanchao signalled on Thursday at the World Economic Forum in Davos that Beijing is willing to keep intervening in its stock market. In an interview with Bloomberg, he said the government would increase regulation in an effort to limit volatility.

In other China news, the central bank is reportedly asking banks to put a limit on lending rates charged to one another to prevent a surge in demand for funds ahead of the holidays. The monetary authority is trying to avoid a cash crunch at a time of record capital outflows.

The People’s Bank of China was said to have told banks to cancel repurchase agreements that were conducted at interest rates that were considered too high, Bloomberg reported citing sources.

The spot yuan was trading higher against the US dollar, up 0.03%.