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Oil shares pulled regional stock markets higher on Thursday after OPEC members agreed to curb output in a surprise deal, though investors were wary of chasing markets higher as the US presidential election neared.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.9 per cent by mid-morning, thanks to a bounce in energy shares, but other markets such as Hong Kong were trading near the day's lows after an early jump.
Stocks in Europe were expected to open higher following Asia.
“Despite the favourable oil deal, foreign institutional investors are sticking to their favourite counters before the US elections results as there is simply too much market uncertainty,” said Andrew Sullivan, managing director, sales trading at Halting International Securities Group in Hong Kong.
Japan’s Nikkei climbed 1.5 per cent, after losing 1.3 per cent the previous day. In Hong Kong, the benchmark index was up 0.5 per cent with energy-related shares the biggest gainers.
Oil futures retreated in Asian trade as the market grew more sceptical of the deal, pondering how the group agreed to limit production and how OPEC would implement such a plan.
“Investors and traders are sceptical - with good reason. More cynical traders are questioning the complete lack of detail, including the potentially problematic question of which nations will curtail production,” Michael McCarthy, chief market strategist at Sydney’s CM Markets, told Reuters.
Though OPEC’s first agreement to cut production since 2008 drove risky assets initially higher, the lack of detail made some investors wary.
Brent crude eased slightly after earlier climbing to a high of $49.09 when the market opened, its highest since September 9. WTI crude edged lower to $46.99 a barrel, after first hitting $47.47, its highest since September 8.
“I think the markets are still not fully convinced,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
Still, the jump in oil prices boosted risk assets and undermined the yen, which is often seen as a safe haven at times of economic stress.
The dollar rose 0.7 per cent to 101.38 yen, extending its rebound from one-month low of 100.085 touched on Tuesday.
The euro was higher at $1.12305, recovering from Wednesday’s low of $1.1182 helped in part by rebound in shares of Deutsche Bank.
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