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Asia stocks rally as Fed minutes hint at patience on hike

Asian shares rose on Friday, taking their cue from a jump in oil prices and Wall Street gains after minutes of the Federal Reserve’s latest meeting further quelled expectations of an imminent U.S. interest rate hike.

Financial spreadbetters predicted bright starts for European bourses, with Britain’s FTSE 100 .FTSE seen as much as 0.9 percent higher, Germany’s DAX .GDAXI 1.4 percent, and France’s CAC 40 .FCHI 1.3 percent.

The Fed minutes revealed the extent to which policymakers are concerned that a global economic slowdown might threaten the U.S. economic outlook. Though they said overseas turmoil had not “materially altered” economic prospects, they opted to hold interest rates steady last month.

Riskier asset markets, which had risen when the Fed held off raising rates in September, got a further boost on confirmation policy makers won’t rush to tighten policy at a time of slackening global growth.

“The speculation about an imminent U.S. rate hike was a risk that investors had been dealing with for a long time. Because such concern is fading now, investors are willing to take risks,” said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Center.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 1.8 percent, on track for a robust weekly gain of 6.8 percent.

The S&P 500 SPX closed at a seven-week high on Thursday. S&P 500 e-mini futures ESc1 edged up about 0.1 percent in Asian trading.

China’s flagship indexes extended Thursday’s 3 percent gains. The blue-chip CSI300 index .CSI300 was up 1.2 percent in afternoon trade, while the Shanghai Composite Index .SSEC gained 1.1 percent.

“The chance of a U.S. interest rate rise this year is getting slimmer,” said Alex Kwok, chief analyst and head of research at China Investment Securities (HK).

Kwok said expectations that Beijing will unveil more stimulus measures have also soothed fears that China’s economy may be at risk of a hard landing.

Japan’s Nikkei stock index .N225 ended up 1.6 percent, and 4 percent higher for the week.

An unexpectedly weak U.S. jobs report for September had led many investors to speculate that the Fed will not deliver its first hike since 2006 until 2016.

Data out on Thursday showed the number of Americans filing new applications for unemployment benefits fell more than expected to near a 42-year low in the week ended Oct. 3, keeping alive the view that improving labor conditions will prompt the Fed to eventually act.

Still, the dollar withered in line with fading near-term rate-hike expectations, with the dollar index .DXY down about 0.1 percent in Asian trade at 95.223, on track for a weekly loss of 0.6 percent.

The euro was up about 0.1 percent at $1.1285 EUR= after scaling a three-week peak of $1.1328 on Thursday, while the dollar edged up against its Japanese peer to 120.09 yen JPY=.

Emerging currencies also got a lift from the perception that the Fed will opt to keep rates low for a while longer, with Indonesia’s rupiah IDR=ID rising over 3 percent.

Oil prices surged overnight after forecaster PIRA Energy Group predicted crude prices would rise to $70 per barrel by the end of 2016.

Crude oil futures extended gains, with Brent LCOc1 adding 1.5 percent to $53.85 a barrel, up nearly 12 percent for the week. U.S. crude CLc1 was 1.9 percent higher at $50.38, up 10.7 percent for the week.

Gold XAU= added about 0.8 percent to $1,147.10 an ounce, on track for a weekly gain of about 0.9 percent, after volatile trading in the wake of the Fed minutes. A delayed hike to interest rates could support gold in the near term.

 

-REUTERS

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