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Iron ore rally in China affirms Asian markets’ bullish tone

Monday 03.20 BST

What you need to know

  • Iron ore prices hit a four-month high on China construction data
  • Yen firms past ¥111 per dollar mark on industrial output recovery
  • Materials stocks in Australia push higher on iron ore rally
  • Crude oil prices steady with Brent pushing further above $52 a barrel

Overview

Stocks were broadly higher on Monday in Asia as positive data from China’s construction sector bolstered commodities prices, and the yen strengthened following data showing a recovery in Japanese industrial output.

Hot topic

Iron ore prices jumped to their highest level in almost four months in China after a gauge of activity in the country’s construction sector climbed to its highest level in more than three and a half years.

The price of a futures contract for one metric tonne of iron ore on China’s Dalian Commodity Exchange rose as much as 7.3 per cent on Monday to Rmb567, the highest level in nearly four months.

That jump came after the official sub-index for activity growth in China’s construction sector climbed to 62.5 in July, the highest level for that gauge since December of 2013. The price gain came despite weaker readings for growth in the country’s manufacturing and services sectors.

Equities

Asia-Pacific equities were broadly higher, with Hong Kong’s Hang Seng index up 0.5 per cent, bolstered by gains in the financial sector.

Shares in HSBC Holdings were up as much as 1.4 per cent ahead of second-quarter results due out at noon. Hutchison Telecommunications rose as much as 14.6 per cent on news Li Ka-shing had agreed to sell the fixed-line phone business for $1.9bn.

In Sydney the S&P/ASX 200 index was up 0.3 per cent as the materials segment rallied 1.6 per cent on positive construction sector data out of China. BHP Billiton gained 2.5 per cent and rival miner Rio Tinto rose 2.2 per cent.

In Tokyo the Topix was flat after a jumpy morning, with a 0.3 per cent fall in industrials offsetting gains in the consumer discretionary segment.

Forex and fixed income

Japan’s yen strengthened past the ¥111 mark in the morning session to ¥110.43 per dollar, the firmest in six weeks after data showed industrial production climbing back into expansionary territory in July.

The Australian dollar was hovering below the $0.80 mark at $0.798 after dipping as much as 0.4 per cent on word that issuance of building permits in Australia shrank in June.

Outside the region the Canadian dollar was the worst performer among major currencies, weakening to just shy of the C$1.25 per US dollar mark.

The US dollar index tracking the greenback against a basket of peers was up 0.1 per cent at 93.375. The yield, which moves inversely to price, on 10-year US Treasuries was up 1 basis point at 2.28 per cent.

Commodities

Oil was consolidating gains from late on Friday early in the Asia session. Brent crude, the international benchmark, remained safely above the $52 a barrel mark at $52.74, up 0.3 per cent. West Texas Intermediate, the US marker, was up 0.3 per cent at $49.84.

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