Crude oil extended declines, sparking losses among Asian commodity stocks as the dollar reasserted itself following a selloff. Chinese shares climbed amid plans to loosen curbs around margin lending imposed by officials after last year's equity rout.
West Texas Intermediate oil fell below $39, building on losses from Friday spurred by the first increase in U.S. rigs this year. The greenback extended its rebound into a second day after slumping to a five-month low last week as the Federal Reserve pared its interest-rate outlook for 2016. Commodity- linked currencies were the biggest casualties. With Japanese markets closed for a holiday, miners and energy shares led declines across Asia, while Shanghai stocks headed for their longest rally since May as brokerages soared.
Concern traders are placing too much stead in the Fed's pared back plans for raising rates seems to have arrested a selloff that's wiped more than 3 percent from the dollar this month. That comeback spurred a retreat in commodities, which had been propelled higher by crude oil's recovery over the past month. With scaled-up central bank stimulus efforts helping to steady the global equity market, China said Friday it will ease controls around margin trading, a sign concern over volatility there has faded. Speculation policy makers will continue with unprecedented monetary easing helped the Standard & Poor's 500 Index wipe out 2016 losses Friday, reversing the benchmark's worst start to a year on record.
"The policy actions among major global central banks over the past three weeks certainly appears to be coordinated and has helped ease fears about weakening global activity and its contagion into risk assets," Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion, said in an e-mail to clients. "However, investors need to be cautious not to extrapolate recent returns, and the speed of the market recovery, indefinitely into market returns from here."
China reports on commodity imports Monday, and Taiwan updates export data. Hong Kong reports on consumer prices ahead of home sales figures out of the U.S..
WTI futures fell 1.4 percent to $38.89 a barrel as of 11:02 a.m. Tokyo time, after sliding 1.9 percent on Friday to trim its fifth straight weekly advance to 2.4 percent. Brent crude lost 0.8 percent to $40.87 after falling 0.8 percent at the end of last week.
Rigs targeting oil in U.S. fields rose by one to 387 last week, Baker Hughes Inc. said on its website Friday, the first increase of 2016. The prior week's number was the lowest since December 2009. The greenback's stabilization has also unsettled oil, which is priced in the U.S. currency, along with a number of other commodities.
"There is a bit of a correction after the spike above $40 because the market is still oversupplied and demand is sluggish, although it's better than what it was," Evan Lucas, a market strategist at IG Ltd. in Melbourne, said by phone. "An average of around $35 a barrel is likely in the second quarter. There are signs that the supply side is feeling the pinch and have been forced to act."
Gold for immediate delivery declined a third straight day, losing 0.2 percent to $1,252.38 an ounce, while most industrial metals attempted a rebound, with copper rising 0.4 percent in London.
Wheat futures added 0.8 percent, rising for a second session. Weather across parts of the U.S. plains over the weekend was colder than expected, raising concerns that crops may be damaged, AgResource Co. said in a report on Sunday.
The MSCI Asia Pacific excluding Japan Index slipped 0.3 percent, snapping a two-day climb as Australia's S&P/ASX 200 Index lost 0.5 percent and the Kospi index in Seoul fell 0.1 percent. New Zealand's S&P/NZX 50 Index added 0.2 percent, while Taiwanese shares declined 0.4 percent.
"We're not seeing a lot of enthusiasm in markets given the holiday-shortened week and the strong rally that we've had recently," Michael McCarthy, chief market strategist at CMC Markets in Sydney, said by phone, referring to Easter holidays in a number of markets starting from Thursday. "We need to see more catalyst for this rally to continue. We need to see some signs growth is stable."
In China, the Shanghai Composite Index rallied 1.9 percent in a seventh straight day of gains. Hong Kong's Hang Seng Index and the Hang Seng China Enterprises Index, a gauge of mainland shares listed in the city, advanced at least 0.4 percent.
The move on margin lending in the equity market will see interest rates on such debt cut to as low as 3 percent. Speculation the shift was coming fueled a record weekly jump in the small-cap dominated ChiNext Index last week.
"The correlation between margin lending and Chinese equities is highly correlated - this will be positive," Evan Lucas, a markets strategist in Melbourne at IG Ltd., said in an e-mail to clients.
Commentary from some of China's top leaders at the weekend indicated senior policy makers are aware of and concerned about the surge in leverage there. People's Bank of China Governor Zhou Xiaochuan and Vice Premier Zhang Gaoli indicated at the annual China Development Forum in Beijing that they think overall lending in Asia's largest economy is too high, just days after the national legislature said their top priority was securing annual growth of at least 6.5 percent.
Futures on the S&P 500 were down 0.2 percent early Monday, after the U.S. benchmark rose 0.4 percent on Friday, bringing its fifth straight weekly gain to 1.4 percent. Nasdaq 100 Index futures fell 0.3 percent.
The New Zealand dollar weakened 0.6 percent, while Canada's currency was down at least 0.4 percent with the South African rand. The Australian dollar slipped 0.4 percent to 75.81 U.S. cents in the wake of its third straight weekly gain. The Korean won dropped 0.4 percent following a surge last week of 2.6 percent.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, added 0.1 percent after rallying 0.3 percent on Friday to pare its retreat in the week.
Odds the Fed will boost benchmark rates by the end of 2016 have receded to 68 percent, from 77 percent a week ago, with the central bank citing concern over the impact of global market turmoil on the U.S. economy in the decision to reduce its rate- hike ambitions.