Asian shares bounce back amid plunging oil prices

Sydney — Asian shares rebounded from 11-month lows on Thursday as a plunge in oil prices and softer US labour data helped pull treasury yields off 16-year peaks, though a looming US payrolls report could make or break the rally.

Tracking overnight gains on Wall Street, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6%. Japan’s Nikkei climbed 1.2%.

Hong Kong’s Hang Seng index advanced 0.3%. China’s mainland markets remain closed for holidays.

Overnight, the rout in treasuries took a breather after a cooler-than-expected US private payrolls report and a 5% drop in oil prices offered some comfort to investors. Risk sentiment has taken a beating on the view that interest rates will stay high for longer.

Ten-year yields eased 2 basis points (bps) to 4.7163% on Thursday, continuing their overnight retreat from a fresh 16-year high of 4.8840%.

Much will depend on US non-farm payrolls data on Friday. Economists expect 170,000 jobs created in September, slowing from 187,000 in August, while the jobless rate likely ticked lower to 3.7% from 3.8%.

“I think those numbers will have to be a long way from those expectations for it to move the dial for the Fed, but numbers close to the expectations might serve to calm jitters in the treasury market,” said Stephen Miller, an investment strategist at GSFM, a Sydney-based fund.

“Given where treasury yields are at the moment, I think the risks are pretty evenly balanced between them on the downside and on the upside.”

The recent spike in yields has meant they have reached levels where, if sustained, would see a significant tightening in financial conditions, bolstering the case for no further hikes from the Fed. The CME FedWatch Tool now prices in a 23% chance of a hike in November, compared with 28% a day ago.

The US dollar came off highs and Wall Street rebounded, led by the tech-heavy Nasdaq, which rose more than 1% overnight.

The battered yen also got a much needed reprieve, rallying 0.5% on Thursday to 148.34 per dollar. Traders are continuing to wonder whether a sharp rebound away from the 150 level on Tuesday was due to intervention from Japanese authorities.

“Whether or not the BOJ intervened, we still judge the risk of intervention is high while USD/JPY follows US treasury yields higher,” said Joseph Capurso, head of international economics at CBA.

Despite the renewed strength for the US dollar, analysts still see weakness for it ahead, a Reuters poll showed.

Oil prices gained on Thursday after losing a colossal 5% to where they were at the beginning of the year. Brent crude futures rose 0.3% to $86.10 per barrel and US West Texas Intermediate (WTI) crude futures were also up 0.3% at $84.45.

The price of gold gained 0.3% to $1,826.69 per ounce.

Reuters