SYDNEY, March 18 — Oil extended losses to a seventh day, with prices heading toward a bear market, before US stockpiles data and the Federal Reserve’s monetary policy decision. Asian shares rallied amid speculation China may do more to boost growth, while European equity-index futures climbed.

West Texas Intermediate crude slid 2 per cent to US$42.61 (RM158) a barrel by 7:15am in London, before a report projected to show record inventories. The Bloomberg Dollar Spot Index erased earlier losses, with the euro slipping 0.1 per cent. Israel’s shekel weakened as Prime Minister Benjamin Netanyahu won the most seats in an election. The MSCI Asia Pacific Index rose a second day, led by Chinese shares in Hong Kong. Standard & Poor’s 500 Index futures were 0.1 per cent higher and those on the Euro Stoxx 50 Index added 0.3 per cent.

“All attention is on the Fed,” said Ratch Sodsatit, Bangkok-based managing director of Asset Plus Fund Management Co, which oversees about US$972 million of assets. “Everyone knows that US rates are on the rise so the biggest focus for uncertainty is on the timing and how the economy is tolerating the stronger dollar. Crude oil is going to be at these levels for a while, which should benefit Asian economies and especially China. Low inflation will enable authorities to ease more.”

Oil’s tumble back toward a bear market could exacerbate deflationary forces working against global central bank efforts to support prices. The Fed may cut a reference to being “patient” on rate rises in its policy statement, Morgan Stanley and BNP Paribas SA say, giving it flexibility as to the timing of an interest rate increase. China’s new home prices fell in 66 cities last month as weakness in the property sector spread, while Sri Lanka’s central bank held rates.

Funds futures

Futures trading in the US showed a 54 per cent chance the Fed will raise its benchmark rate to at least 0.5 per cent by September, according to data compiled by Bloomberg. That was down from 56 per cent odds a week ago.

West Texas Intermediate crude has dropped 15 per cent over the past seven days, and is down about 20 per cent from this year’s peak, meeting some investors definition of a bear market. Figures from the industry-funded American Petroleum Institute indicated supplies rose by 10.5 million barrels last week, with analysts predicting data today will show US crude supplies rose from a more-than 30-year high.

Brent oil futures retreated 0.7 per cent to US$53.14 a barrel after rising 0.1 per cent yesterday. The Bloomberg Commodity Index fell 0.3 per cent, taking its decline this year to 7.4 per cent, as gold dropped 0.2 per cent and copper for three-month delivery on the London Metal Exchange slid 1 per cent.

Volatility aversion

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was 0.1 per cent stronger after closing lower for a second day yesterday. The gauge retreated 0.5 per cent from a decade high on Monday. The euro was at US$1.0581 after rebounding from a 12-year low the past two days, while the yen traded at 121.38 per dollar. The won climbed to 1,129.77 per dollar.

“I think most people are still pretty happy to be generally long US dollars, but they are worried about how the message is going to come across” from the FOMC and Fed Chair Janet Yellen’s press conference, said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd. in Auckland, referring to Fed forecasts for growth, inflation, and interest rates. “People are reluctant to do anything until they see net volatility pass through the market, and they will be relatively happy to continue with the existing trend.”

Yields on 10-year Treasury notes were little changed at 2.05 per cent after falling for a third day in New York. European bonds were little changed.

Japan bonds

The rate on Japanese notes due in a decade fell 4 1/2 basis points to 0.365 per cent, almost twice the record-low 0.195 per cent hit in January. The US$1.1 trillion Government Pension Investment Fund and its smaller peers almost doubled net sales of Japanese government bonds to ¥5.56 trillion in the fourth quarter, the most in Bank of Japan figures dating back to 1998.

The S&P 500 fell as much as 0.8 per cent yesterday, after rallying the day before by the most since Feb. 3 amid data showing an unexpected drop in factory production and a retreat in confidence among US homebuilders. A report yesterday indicated housing starts plunged in February, while an increase in building permits indicated the drop may prove temporary.

Hong Kong’s Hang Seng China Enterprises Index advanced 1.3 per cent and the Hang Seng Index added 0.9 per cent. The Shanghai Composite Index gained 2.1 per cent from a more-than six-year high amid speculation that falling property prices give China more room to extend stimulus measures as it seeks to meet its annual growth target of about seven per cent.

Asia stocks

Nine of the 10 industry groups on the Asia-Pacific stock gauge climbed today. An MSCI measure of emerging-market shares has added 1.6 per cent so far this week and is close to erasing this year’s loss.

In Tokyo, Nintendo Co rose 21 per cent, the daily limit, after announcing the end of its holdout from smartphone games, with plans to develop new titles for mobile devices made by other companies. The Topix index was 0.8 per cent higher and the Nikkei 225 Stock Average added 0.6 per cent to a 15-year closing high.

The shekel weakened 0.2 per cent to 4.0166 per dollar. Netanyahu’s Likud captured 29 seats in the 120-member parliament, five more than Isaac Herzog’s Zionist Union, Israel radio reported citing unofficial results with 99 per cent of the vote counted.

Malaysia’s ringgit swung to a decline of 0.3 per cent versus the dollar after Fitch Ratings said the country’s credit rating is “more than 50 per cent likely” to be downgraded. The dollar bought RM3.7058 as Fitch cited a worsening trade balance and a state investment company that’s struggling to meets its debt obligations.

The New Zealand dollar retreated 0.1 per cent to 72.97 US cents after slipping 0.9 per cent yesterday after the price of whole milk powder at GlobalDairyTrade’s fortnightly auction fell for the second time in a row. — Bloomberg