ASIA MARKETS: Nikkei Hits Best Close Of 2016 As OPEC Deal Lifts Asian Markets

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By Willa Plank and Jenny W. Hsu

Surprise deal drives gains for energy-related stocks

Asian stock markets rose Thursday, with Japan'sNikkei at its highest close this year, after major oil-producing nations signed a deal to cut crude oil output.

Despite much skepticism about the deal, the Organization of the Petroleum Exporting Countries late Wednesday agreed to cut production by 1.2 million barrels a day ( 2016-11-30), marking the group's first concerted effort to slash output since 2008. The move sent crude oil prices up more than 9% overnight.

The OPEC cut represents about 1% of global production, which will help reduce an oil glut that has depressed prices for more than two years.

"People are going to be watching closely if the group can now actually live up to their pledges," said Stuart Ive, a client manager at OM Financial.

Read:The surprise OPEC deal that was 2 years in the making ( opecs-oil-meeting-2016-11-30)

Energy-focused stock markets in Asia were among the best performers on Thursday, with Indonesia's Jakarta Composite Index rising 0.9% and the FTSE Bursa Malaysia Index adding 0.5%.

Among key energy stocks, Woodside Petroleum and Oil Search (WPL.AU) in Australia closed up 6.5% and 9.1%, respectively. In Japan, shares of Japan Petroleum Exploration (1662.TO) surged 12% and Inpex (1605.TO) jumped 10%. In Hong Kong, offshore oil producer Cnooc (0883.HK) added 6.1%.

The surge in oil prices, along with solid U.S. economic data Wednesday, sent the U.S. dollar to its highest level against the yen since February in early Asian trade, supporting key export and manufacturing stocks in Japan. The dollar-yen pair has since erased its gains, but was still trading at around 114.

OPEC's decision overnight is helping support U.S. inflation expectations, which have been building after the election of Donald Trump as president, said Christoffer Moltke-Leth, director of global sales trading at Saxo Capital Markets.

The U.S.Federal Reserve will "have to act on this to make sure it doesn't spin out of control," he said.

The yield on the U.S. 10-year Treasury rose to 2.3864% overnight from 2.3670% on Wednesday, according to data from Thomson Reuters.

Read:November was the worst month for Treasurys since 2009 ( opec-optimism-2016-11-30)

Rising Treasury yields have pulled money out of Asia in recent weeks, sinking regional currencies. But the impact on Asian currencies of higher oil prices, increased inflation expectations and rising Treasury yields was somewhat muted Thursday.

The Philippine peso and the Indonesian rupiah were down 0.1% against the U.S. dollar. The Japanese yen and Korean won were up 0.3% and 0.7%, respectively.

Chinese factory activity

Meanwhile, strong manufacturing data out of China on Thursday helped drive the Shanghai Composite Index up 0.7%, while the Shenzhen Composite Index rose 0.6%.

An official gauge of China's factory activity rose for a second straight month in November (http://, adding to recent signs of firmness in the world's second-largest economy, official data showed.

China's official manufacturing purchasing managers index rose to 51.7 from October's 51.2. The November reading beat a median forecast of 51.0 by economists polled by The Wall Street Journal. China's official nonmanufacturing PMI, also released Thursday, also rose to 54.7 in November from 54.0 in October ( nonmanufacturing-pmi-climbs-to-547-2016-12-01).

"Both readings are much higher than our expectations. It's very likely that the economic growth rate could be faster in the fourth quarter," said Liu Xuezhi, an economist at Bank of Communications.

Still, sluggish external demand and Beijing's efforts to cut excess industrial capacity will likely continue to weigh on growth, Liu said. As such, a supportive fiscal policy is required to sustain growth momentum, while monetary policy makers will likely focus on curbing financial risks, he said.

  (END) Dow Jones Newswires
  Copyright (c) 2016 Dow Jones & Company, Inc.

This article appears in: Energy , US Markets , Commodities
Referenced Symbols: 1605 , 1662 , BCMXY , CEO , IPXHY

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