Article Highlights

  • U.S. crude up 0.9 pct at $51.92 on supply fears
  • Iraqi forces move towards oil fields held by Kurds in Kirkuk
  • MSCI ex-Japan Asia-Pac index hits record, Nikkei at 21-yr high
  • China in focus ahead of Communist Party congress, key data
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Asian shares advanced to new highs on Monday following Wall Street’s lead, while U.S. oil futures jumped to hover near a six-month peak as escalating tensions between the Iraqi government and Kurdish forces threatened supply.

Iraqi forces began moving at midnight on Sunday towards oil fields held by Kurdish Peshmerga fighters near the oil-rich city of Kirkuk.

In response, U.S. crude climbed 0.9 percent to $51.92 a barrel, not far from $52.85 touched late last month – a level not seen since April. Brent crude climbed 1.2 percent to $57.88 per barrel. MSCI’s broadest index of Asia-Pacific shares outside Japan gained for a fifth day running to be up 0.3 percent, after U.S. stocks ended at record highs.

Australian shares extended their winning streak to a fourth straight session to rise 0.6 percent, while Japan’s Nikkei rallied for a sixth day to the highest since November 1996.

China will be in the driver’s seat this week ahead of the start of a leadership transition event and key economic data including inflation and third quarter economic growth.

In terms of event risk the focus is on China with the Party Congress getting underway on Wednesday… and inflation data later today,” said Chris Weston, chief market strategist at IG Markets.

The inflation numbers are important as they form part of the argument around the global reflation thematic priced into markets of late.

Policymakers globally are counting on a pick up in inflation while they look to wind back some stimulus as global growth gathers momentum.

But persistent modest readings in U.S. core consumer prices continued, with underlying inflation benign at 0.2 percent in August, data showed on Friday.

That is a worry for the U.S. Federal Reserve which has been engaged in a vigorous debate on the inflation path as it tightens its ultra-loose policy.

The reading sent U.S. Treasury bond prices rallying with the yield on 10-year notes at 2.287 percent versus a top of 2.40 percent last week, as investors trimmed the implied probability of a December rate hike.

The dollar index, which measures the greenback against a basket of currencies, was mostly unchanged at 93.115.

The euro was a touch softer at $1.812 and was poised for its third straight day of losses on lingering concerns about the eurozone after a conservative Austrian leader secured a victory in parliamentary elections at the weekend.

In Germany, Chancellor Angela Merkel prepares for tricky coalition talks after her party suffered a defeat at the hands of the Social Democrats in a vote in the northern state of Lower Saxony on Sunday.

Meanwhile, Catalan leader Carles Puigdemont has until 0800 GMT on Monday to clarify whether he is calling for the region’s independence from Spain, with Madrid threatening a return to direct rule if his stance remains ambiguous.

In commodities, gold hovered near three-week highs at $1.304.11.