©2015 Bloomberg News
Emma O’Brien
(Bloomberg) — Oil rose following its steepest retreat in two months after U.S. crude inventories jumped to a record, fueling concern over a glut in the commodity. Most Asian stock futures climbed amid gains in the U.S., while gold held losses.

West Texas Intermediate crude rose 1 percent to $50.93 a barrel by 8:48 a.m. in Tokyo, after tumbling 6.6 percent Wednesday. Japanese index futures climbed 0.2 percent in Osaka, while contracts on gauges in Hong Kong soared at least 2 percent in most recent trading. Standard & Poor’s 500 Index futures were little changed after a 0.3 percent increase in the equity measure. Gold traded near its lowest price this month.

Oil stockpiles expanded the most in 14 years last week, to the highest level since 1930, government data showed on Wednesday. U.S. shares advanced amid signs Federal Reserve officials were split on whether the economy is strong enough to withstand higher interest rates as soon as June. Minutes of the central bank’s March meeting showed some policy makers argued lower oil and a stronger dollar could damp inflation.

“Insights to the thinking of the U.S. Federal Reserve boards and a collapse in oil prices left investors in a cautiously optimistic mood,” Michael McCarthy, chief markets strategist in Sydney at CMC Markets, said in an e-mail. “No one knows exactly when U.S. interest rates will rise. While talk of a June hike unsettled some, the revelation that some voting members think 2016 is the likely start of normalization gave comfort that the Fed remains responsive to economic developments.”

Minutes Split

While several officials said the economic data and outlook probably warranted higher rates in June, other Fed policy makers argued that lower energy prices and dollar strength would damp inflation, delaying the need for rate increases. A couple said that the economy wouldn’t be ready for tighter policy until next year.

The Fed minutes of a meeting held before recent disappointing payroll figures added to conflicting data that have called into question whether the U.S. recovery is strong enough to justify higher rates. U.S. equities rallied March 18 after the Fed said growth has moderated and officials indicated borrowing costs will rise more slowly than previously estimated.

Policy makers dropped an assurance to be “patient” in a statement following the March meeting. While Chair Janet Yellen has laid the groundwork for an increase this year, officials recently have hinted at putting off raising for the next two meetings while keeping a “shallow” pace once they start.

Futures on the Fed funds rate put the odds of a rate hike in September at 30.7 percent Wednesday, up from 29.8 percent on Tuesday, according to data compiled by Bloomberg.
Oil Markets
Fed governor Jerome Powell said Wednesday that he saw a greater risk of damaging the economy with a premature rate increase than of triggering inflation by waiting too long. New York Fed President William Dudley said that while recent data has surprised on the downside, he can imagine scenarios in which policy makers raise borrowing costs at the June meeting.

WTI climbed to its highest level this year before Wednesday’s retreat, which marked the biggest one-day drop since Feb. 4. Crude is down more than 50 percent since June after the U.S. shale boom added to global supplies, while OPEC members refused to reduce output.

Saudi Arabia increased oil production in March to the highest level in at least 12 years, while the U.S. Energy Information Administration said Tuesday that crude prices could tumble $15 a barrel next year if sanctions are lifted following a final deal with Iran on its nuclear program.
Fast Retailing
In the stock futures market, contracts on Japan’s Nikkei 225 Stock Average were bid at 19.860 in the Osaka pre-market, from 19.820 at their close in Japan Wednesday. Futures on the Chicago Mercantile Exchange were little changed at 19.880 after rising 0.5 percent in the previous session. The Nikkei 225 climbed 0.8 percent Wednesday to its highest level since 2000. Fast Retailing Co., the index’s biggest stock, reports earnings Thursday, and Japan posts data on machinery tool orders.

Futures on Hong Kong’s Hang Seng Index jumped 2.1 percent in recent trading, as contracts on the Hang Seng China Enterprises Index, which tracks mainland Chinese stocks listed in the city, advanced 2.2 percent. Both indexes gained at last 3.8 percent Wednesday as purchases of Hong Kong-traded shares through the city’s mainland exchange link met their full quota for the first time, driving turnover to a record.

FTSE China A50 Index futures added 0.4 percent in Singapore, with the Shanghai Composite Index up 0.8 percent Wednesday to its highest level since March 2008. The Bloomberg China-US Equity Index, a gauge of the most-traded Chinese equities in New York, surged 4.9 percent, the most since November 2011.

Chinese Surge

“We’ve got the domestic liquidity from China making a statement that the Chinese economy is doing fine and shares are undervalued in Hong Kong,” Ng Soo Nam, Singapore-based head of Asian equities at Columbia Threadneedle, which manages about $506 billion globally, said Wednesday. “Liquidity can now move between the two markets as there are fewer restrictions.”

China reports on consumer prices Friday.

Alcoa Inc., the largest U.S. aluminum producer, slipped about 3 percent in after-hours trading after reporting sales that trailed analysts’ estimates. The company, which unofficially kicks off the U.S. earnings season, also changed its view on global aluminum supplies, indicating it expects a surplus in the industrial metal in 2015, after earlier predicting a deficit. While revenue lagged behind projections, Alcoa’s first-quarter profit beat analysts estimates.

Dollar Index

Concern that tumbling oil prices and gains in the dollar will hurt profits has weighed on American equities. Profits for S&P 500 companies probably fell 5.8 percent in the first three months of the year, according to analysts’ estimates compiled by Bloomberg. Earnings are also projected to slump in the next two quarters. JPMorgan Chase & Co. and Intel Corp. are among companies scheduled to report earnings over the next seven days.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed for a second day Thursday. The gauge sank 0.7 percent April 3 after the weaker- than-forecast jobs report fueled the case for keeping key rates near zero.

The dollar was steady at $1.0781 per euro after gaining 0.3 percent Wednesday, and was little changed at 120.14 yen. One- month non-deliverable forwards on the South Korean won depreciated 0.3 percent to 1,094.25 a dollar before the country’s central bank reviews benchmark rates Thursday.

In Europe, BG Group Plc surged 27 percent after Royal Dutch Shell Plc agreed to buy the company for $70 billion. Shell agreed to pay a premium of about 50 percent on BG’s closing share price on Tuesday. Shell dropped 5.3 percent in London, while BP Plc climbed 0.5 percent.

Gold for immediate delivery was little changed at $1,201.60 an ounce after slipping 0.6 percent Wednesday, the biggest one- day loss since March 30. Gold was steady last quarter as investors tried to gauge when the Fed would start raising borrowing costs.
–With assistance from Ben Sharples in Melbourne.
To contact the reporter on this story: Emma O’Brien in Wellington at eobrien6@bloomberg.net To contact the editors responsible for this story: Emma O’Brien at eobrien6@bloomberg.net John McCluskey