©2016 Bloomberg News
O0YXY86JIJUU

(Bloomberg) — Risk was back in favor in Asia, with stocks rallying from a three-year low to extend the global equity rebound amid signs of stabilization in oil prices and Chinese markets. High-yielding currencies climbed, while sovereign debt retreated.

Shares from Japan to South Korea tracked a relief rally that started in the U.S., as American crude held around $31 a barrel after rebounding from a 12-year low. Sentiment has also been bolstered by Federal Reserve Bank of St Louis chief James Bullard, a vocal supporter of higher interest rates in recent months, who said the rout in energy prices may dent inflation expectations. Canada’s dollar advanced following a record run of declines and the Malaysian ringgit climbed. U.S. Treasuries and Australian bonds dropped.

Bullard’s commentsand better-than-expected earnings from JPMorgan Chase & Co. helped fuel the U.S. rebound, as technical signals indicated the selling that saw global equities post their worst start to a year on record had gone too far. More than $5 trillion has been shaved from world stock values in 2016 amid concern over the rout in oil and China’s ability to manage its markets and slowing economy. The MSCI Asia Pacific Index slid to its lowest level since November 2012 last session and is headed for a second week of losses.

“Asian markets look set for a bounce today, but its sustainability is still an open question,” Angus Nicholson, a market analyst in Melbourne at IG Ltd., said in an e-mail to clients. “The big unknown today is whether we have seen a sustainable bounce in Chinese equities and whether yesterday’s gains can be held onto. Some sense of stability does seem to have been wrestled into the Chinese yuan this week, but the Chinese equity markets have been more immune to muscular shows of state intervention.”

Stocks

The 1,022-stock Asia-Pacific gauge rose for only the second time in two weeks, adding 0.7 percent as of 9:36 a.m. Tokyo time, as Japan’s Topix index gained 1.1 percent after touching its lowest level since September on Thursday. The yen, which typically moves at odds with Japanese stocks and is a popular haven investment, was steady at 118.20 per dollar after slipping 0.3 percent on Thursday. The yen has retreated 0.8 percent this week, though it is still the best-performing major currency versus the greenback this year.

Australia’s S&P/ASX 200 Index gained 0.6 percent to pare its weekly slide to 1.1 percent, following on from last week’s 5.8 percent tumble. BHP Billiton Ltd., the world’s biggest mining company and a big casualty of this year’s selloff, climbed 2.7 percent, even after saying it expected to book a $4.9 billion writedown on its U.S. shale assets.

New Zealand’s S&P/NZX 50 Index advanced 0.9 percent to erase its drop for the week, while the Kospi index in Seoul added 0.7 percent.

In Hong Kong, futures signaled a more mixed picture, with contracts on the Hang Seng Index down 0.1 percent, while those on the Hang Seng China Enterprises gauge advanced 0.3 percent. Contracts on the FTSE China A50 Index were down 0.1 percent in most recent trade.

The Shanghai Composite Index rallied 2 percent on Thursday amid speculation state-backed funds were supporting equities after the gauge see-sawed earlier in the week. Earlier in the session, the index was on the brink of a bear market, falling below its lowest level reached during last August’s selloff.

The Standard & Poor’s 500 Index swung back to gains on Thursday, rallying 1.7 percent as the Dow Jones Industrial Average reclaimed more than 200 points. The rebound helped the MSCI All-Country World Index to climb 0.2 percent, only its second daily advance since Jan. 4.

Futures on the S&P 500 added 0.2 percent on Friday, rising with those on the Dow Jones Industrial Average and Nasdaq 100 Index.

The S&P 500’s plunge on Wednesday triggered a technical signal that indicates it’s oversold. The gauge’s relative strength index, which measures whether gains or losses have been too fast to sustain, fell below 30, a threshold indicating a rebound may be imminent. The last time the RSI was that low was on Aug. 25, when the S&P 500 hit a bottom and rallied 6.5 percent over the next three days.

“This is the relief rally we’ve been waiting for,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird, which oversees $110 billion. “Pessimism had grown to such a level that enough cash had been raised on the sidelines to support at least a short-term rally. Better-than- expected earnings could be something for the bulls to grasp and provide this rebound some sustainability.”

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 Sarah McDonald