Most Asia markets rise as oil steadies; Nikkei up 3.5%
Toshifumi Kitamura | AFP | Getty Images. Futures pointed to a higher open for Asian markets on Tuesday, after a reversal in oil prices overnight sent U.S. stocks up. ·CNBC
Saheli Roy Choudhury
Most Asian markets gained on Tuesday, led by a jump in Japan shares, as oil prices steadied after Monday's drop on producers' failure to reach a production-freeze deal over the weekend.
The benchmark Nikkei 225 (Nihon Kenzai Shinbun: .N225) jumped 3.31 percent, retracing most of its 3.4 percent loss in the previous session, boosted by a relatively weaker yen against the dollar and as market players digested the extent of damage from last week's earthquakes.
Australia's ASX 200 (^AXJO) added 1.03 percent, with the energy and materials subindexes leading gains. In South Korea, the Kospi (Korea Stock Exchange: .KS11) was flat. Hong Kong's Hang Seng index (Hong Kong Stock Exchange: .HSI) was up 0.59 percent. Chinese mainland markets were muted, with the Shanghai composite (Shanghai Stock Exchange: .SSEC) nearly flat and the Shenzhen composite (Dow Jones Global Indexes: .DJSZ) up only 0.1 percent.
Oil prices retreated during Asian hours, after paring most losses overnight. Global benchmark Brent was down 0.49 percent at $42.70 a barrel as of 12:15 p.m. HK/SIN time, after settling down 0.4 percent. U.S. crude futures were lower by 0.23 percent to $39.69 a barrel, after finishing down 1.4 percent overnight.
On Sunday, the world's largest oil exporting countries failed to reach an agreement in Doha, Qatar, to freeze output at January levels in order to tackle the global supply glut.
The deal's failure initially sent oil prices tumbling over 5 percent. The reversal came after reports said that a workers' strike in Kuwait had hit the gulf country's daily oil output. Reuters reported that the strike cut the OPEC producer's crude output by more than 60 percent, from about 3 million barrels per day to about 1.1 million.
Analysts said Kuwait's reduction in output remains supportive for crude for the time being.
Energy stocks in the region mostly rebounded Tuesday, with shares of Santos (ASX:STO-AU) up 3.87 percent, Oil Search (ASX:OSH-AU) advancing 5.14 percent and Woodside Petroleum (ASX:WPL-AU) up 3.22 percent. Japan's Inpex (Tokyo Stock Exchange: 1605.T-JP) advanced 2.1 percent, while Chinese mainland shares of Sinopec (Shanghai Stock Exchange: 688-SZ) were flat.
The reversal in oil prices gave an overnight boost to commodity currencies such as the Australian dollar.
The Aussie (Exchange:AUD=) traded at $0.7775 as of 11:47 a.m. HK/SIN time, compared with around $0.76 during Asian hours in the previous session.
"Investors were relieved that oil did not fall 10 percent on the back of the Doha meeting and they were quick to reward risk currencies like the Australian and New Zealand dollars with gains," said Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, in a morning note.
In the minutes of its most recent meeting, released Tuesday, the Reserve Bank of Australia said it was concerned about the impact of a rising currency, but noted that low inflation could allow it to cut interest rates further. At the April 5 meeting, the RBA had kept rates steady at a record-low 2.0 percent.
The Japanese yen (Exchange:JPY=) also pulled back, with the dollar/yen pair trading at 109.05 in the morning after touching levels under 108 in the previous session.
Major Japanese exporters saw a rebound in their stock prices, with automakers Toyota (Tokyo Stock Exchange: 7203.T-JP), Nissan (Tokyo Stock Exchange: 7201.T-JP) and Honda (Tokyo Stock Exchange: 7267.T-JP) adding between 3.12 and 3.92 percent. Shares of Sony (Tokyo Stock Exchange: 6758.T-JP) rebounded 6.01 percent. Shares of exporters, which typically benefit from a weaker yen, had tumbled in the previous session after reports that some manufacturers were affected by the earthquakes that struck Kyushu island in the south of Japan last week, causing sizable damage.
Reuters reported that Sony and Honda have said their affected production plants in the region will remain suspended for the time being.
In a media statement on Sunday, Toyota said it would suspend production on its vehicle assembly lines in stages, between April 18 and April 23, due to supply shortages resulting from the quakes.
Analysts didn't expect broader damage to Japan's economy.
Marcel Thieliant from Capital Economics said in a morning note, "the scale of damage does not appear huge and production shutdowns by major manufacturers should be reversed before long."
But Thieliant added that in the short term, the impact of the disaster would be felt outside of the Kumamoto prefecture. In particular, he said the "shutdown at Toyota could reduce industrial output by up to 1.8 percent in April," adding the impact will be larger if the shutdown persisted for longer.
In company news, shares of Seven & i Holdings (Tokyo Stock Exchange: 3382.T-JP) in Japan were up 0.9 percent as the company undergoes a leadership shuffle. According to the Nikkei, Seven & i's board is likely to approve a new management team Tuesday.
The Nikkei reported today that on April 7, the board had rejected a proposal, pushed by group chairman and CEO Toshifumi Suzuki, which included removing the president of Seven-Eleven Japan, Ryuichi Isaka. Suzuki has since announced his resignation from all positions in the group, according to the Nikkei.
Down Under, major miner Rio Tinto (ASX:RIO-AU) cut its 2017 production guidance from its Australian iron ore mines due to a delay in its AutoHaul system - a fully-autonomous heavy haul, long distance railway system. In a statement to the ASX, Rio Tinto said production from its Pilbara operations is now expected to be between 330 and 340 million tonnes in 2017, compared with a previous guidance of 350 million tonnes.
For the first quarter of 2016, Rio Tinto's iron ore shipments were at 80.8 million tonnes, climbing 11 percent on-year. Rio shares advanced 3.52 percent in afternoon trade.
Other major miners, BHP Billiton (London Stock Exchange: BLT-GB) and Fortescue (ASX:FMG-AU) advanced 5.35 and 6.27 percent respectively.
Major U.S. indexes closed up overnight, with the Dow Jones industrial average (Dow Jones Global Indexes: .DJI) adding 0.6 percent, the S&P 500 (^GSPC) gaining 0.65 percent and the Nasdaq composite (^IXIC) up by 0.44 percent.
