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Morning Note: Asian Markets Rise as Oil Trades Lower

Asian stocks were mixed Tuesday as government moves to ease lockdown measures around the world were offset by profit-taking from the previous day’s rally, while US oil prices suffered another collapse.

While data is beginning to highlight the impact coronavirus has had on economies, markets have been buoyed in recent days by news that some of the worst-hit countries are finally seeing infection and death rates slow to levels not seen for a month.

However, profit-taking and concern that some containment measures could be lifted too soon — leading to a possible second wave of infection — are tempering any surge across markets.

Focus this week is on policy decisions by the Federal Reserve and European Central Bank, after the Bank of Japan said it would lift the limit on its bond-buying programme to provide liquidity to financial markets.

Equities were broadly lower Tuesday, though they were fluctuating throughout early business.

Tokyo ended the morning 0.6% down and Shanghai fell 1%, while Seoul and Singapore were off around 0.4% each.

Hong Kong, Sydney and Taipei each edged up 0.1%, while Manila was more than 1% higher.

Jakarta also rose, while Wellington surged more than three% as investors returned from a long weekend when the New Zealand government declared victory in its battle against the virus and considered lifting restrictions.

– Crude tumbles –

“Investors continue to play off the bullish-for-growth narrative as several economies around the world set to re-open to the timely central bank week, where guidance will pledge to expand existing asset-purchase schemes if conditions deteriorate,” he wrote in a note.

Despite tentative reopenings in some countries, crude continues to be mauled by concerns over collapsed demand and storage facilities filling up.

WTI plunged below $11 a barrel Tuesday, a day after it lost a quarter of its value, after a major exchange-traded fund started selling its short-term contracts of the commodity.

The United States Oil Fund — a massive, oil-backed exchange-traded vehicle — said it would sell all its holdings in the June delivery and would buy into longer-dated contracts.

The move highlighted fears that storage is filling up and that when futures contracts do expire, buyers may find there is little space to put the oil they have purchased.

The Oil Fund’s move “is causing a massive price distortion between June and July”, Innes said. WTI for July was changing hands at more than $18 Tuesday.