Oil, copper, Asian shares gain on solid China trade data

Reuters: Oil, copper and Asian shares rose on Friday after China’s strong trade data set the scene for economic recovery, although investors opted to book profits before next week’s Chinese new year holidays, limiting gains.

European markets are seen climbing, with financial spreadbetters predicting London’s FTSE 100, Paris’s CAC-40 and Frankfurt’s DAX would open up around 0.5%. A 0.2% drop in US stock futures pointed to a steady Wall Street start.

The MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.3%, wiping earlier losses as bearish sentiment was carried over overnight after European Central Bank President Mario Draghi noted risks still facing the euro zone economy.

The pan-Asian index rose to an 18-month high on Monday. After starting 2013 with a 2.4% weekly gain, the index has consolidated in a range between a 0.8% rise and a 0.8% fall, and looked set for a weekly loss of 0.6%.

China said its exports grew 25% in January from a year ago, the strongest showing since April 2011 and well ahead of market expectations for a 17% rise, while imports also beat forecasts, surging 28.8% on the year.

“China’s economic conditions are improving and the trade data confirms the continuation of a recovery trend. Not just the trade data but retail, production and investment flows clearly show that the economy bottomed out in the third quarter last year,” said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo.

Australian shares rallied 0.7% to 34-month highs, led by financial and mining stocks. South Korean shares jumped 1%, on track to reverse six losing sessions as investors bought up battered shares after recent declines.

Japan’s Nikkei stock average snapped a 12-week winning streak to close down 1.8% as investors took profits from the index’s surge to its highest level since October 2008 on Wednesday. Japanese markets will be closed on Monday for a public holiday.

“Asian markets are undergoing a pre-holiday adjustment, keeping prices top-heavy, with many opting to book profits. Prices have gained sharply over the past months, so a correction is healthy. But the upward trend in Asian equities markets remains intact,” Daiwa’s Yuihama said.

Chinese markets are closed next week for the Lunar New Year holiday, while Hong Kong will resume trading on Thursday.

The euro steadied at $ 1.3397, after slumping to a two-week low of $ 1.33705 on Thursday as investors took Draghi’s comments as signalling concerns about the euro and Europe’s growth outlook. The euro scaled a 14-1/2-month high of $ 1.3711 last week.

Draghi said the ECB will monitor the economic impact of a strengthening euro, feeding expectations the currency’s climb could open the door to an interest rate cut. But he also said the euro’s appreciation suggested confidence in the currency was returning.

Spain has already secured more than 18% of its full-year medium- and long-term funding target, thanks to strong investor demand as worries about Madrid’s financing ability eased.

“Currencies are increasingly becoming part of the policy debate...In the case of the EUR, we believe that the bullish ‘overshooting’ trend will remain intact as ECB policy continues to promote an asset market friendly environment,” Morgan Stanley said in a note.

It added that anticipation of the Bank of Japan’s expected bolder easing steps is set to keep the weak yen trend going, supporting global risk appetite.

The dollar fell 0.4% to 93.25 yen but not far from 94.075 yen, its highest since May 2010 on Wednesday. The euro eased 0.4% to 124.93 yen, after touching its strongest since April 2010 of 127.71 on Wednesday.

Friday’s data showing Japan logged a current account deficit for a second straight month in December for its smallest annual surplus on record – evidence of deteriorating trade balances, which support the case for yen selling.

“Japan will remain a nation of current account surpluses but the surplus will not be as high as it used to be,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo. Upbeat economic reports from China, the world’s top consumer of raw materials, lifted industrial commodities on a more robust demand outlook.

London copper rose for the first time in four sessions, up 0.6% to $ 8,245 a metric ton (1.1023 tons).

Brent futures rose towards $ 118 per barrel, heading for a fourth weekly gain and US crude futures rose 0.3% to $ 96.10.

“The (China) numbers are stronger than expected, which is an encouraging sign,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. “(But) we will need to wait until March to start getting a better sense of the medium-term trend on China.”

Spot gold regained its footing and traded up 0.1% at $ 1,671.80 an ounce after falling on Thursday as the euro weakened. Industrial metals, platinum and palladium, retreated from 17-month highs.