Asia set for mixed open after oil rises, Fed 'keeps bulls in check'

Asia set for mixed open after oil rises, Fed 'keeps bulls in check'

Asian markets opened modestly higher on Thursday, likely taking cues from a stronger finish in the US, helped by rising oil prices and the release of dovish Federal Reserve minutes. Australia's ASX 200 was up 0.58 per cent, boosted by gains in the energy, materials and the heavily-weighted financials sub-indexes. In Japan, the Nikkei 225 was near flat at 15,374.37, while across the Korean Strait, the Kospi was up by 1 per cent.

Major indexes in the region had sold off in the previous session on global growth concerns that saw a flight to safety. "Calmer heads seem to have prevailed in the US and we are once again seeing a situation where the US economy is seemingly looking OK, while the UK and Europe are showing increasing signs of fragility," Chris Weston, chief market strategist at brokerage firm IG, said in a Thursday morning note.

Major US indexes finished higher. The Dow Jones industrial average closed up 78 points, or 0.44 per cent, at 17,918.62, the S&P 500 closed up 11.18 points, or 0.54 per cent, at 2,099.73, and the Nasdaq composite was up 36.26 points, or 0.75 per cent, at 4,859.16. Stateside, data showed the pace of growth in the country's service sector increased in June by the fastest pace in seven months.

"If we went off this report alone, then the Federal Reserve would be putting rates up today, but that is clearly not the case with the May trade balance and dovish (yet largely redundant) set of FOMC minutes keeping the growth bulls in check," said Weston. The US trade deficit widened more than expected in May. Minutes from the Fed's June meeting, meanwhile, suggested policymakers were cautious about raising rates.

Asian markets sold off on Wednesday as investors scurried into safe-haven plays on global growth concerns that sent bond yields to record lowers. Worries were spurred by poor US factory orders data, Chinese Premier Li Keqiang's Monday remarks suggesting China may not maintain its 6.7 per cent growth rate, and renewed fears over the fallout from the Brexit vote.

In the currency market, the dollar traded at 96.097 against a basket of currencies, coming off levels near 96.290 it traded at on Wednesday afternoon Asia time.

The Japanese yen, a safe-haven currency, traded at 101.21 against the greenback, after touching the 100 handle in the previous session and levels near 103 on Friday. Analysts said the fresh strength in the yen seen on Wednesday was due to a flight to safety amid jitters across financial markets.

The British pound traded at $1.2921 (S$2.25) as of 8:27 a.m. HK/SIN on Thursday. The Cable dropped to a fresh 31-year low of $1.2796 on Wednesday amid persistent uncertainty surrounding the UK's future as a result of its decision to leave the European Union.

Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, said the further drop in the sterling was due to "nothing more than thin liquidity conditions."

"Ultimately sterling is headed lower as bad news worsens," Lien added. "Brexit puts significant stress on the financial sector and property funds are the first to feel the pain. Other sectors will start to implode, edging the UK economy and British pound lower."

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