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Asian energy, pharma firms rally but broader markets struggle

HONG KONG (AFP) – Asian energy firms built on the previous day s gains Thursday thanks to another surge in oil prices while pharmaceuticals also outperformed following the collapse of a huge US drugs tie-up.

However, regional stock markets struggled despite the release of minutes from the Federal Reserve s latest meeting showing policymakers broadly agree US interest rate should remain low.

The prospect of borrowing costs staying unchanged until at least June put further pressure on the dollar, which was sitting at 17-month lows against the yen and also struggling against emerging market currencies.

The Brent crude contract broke back above $40 following data showing a sharp drop in US inventories in the week to April 1, suggesting a pick-up in demand. The news also comes just weeks ahead of the crucial US driving season.

Brent was up 0.7 percent at $40.13 in Asia, while West Texas Intermediate added 1.1 percent to $38.16.

The two contracts have stormed higher since Kuwait said Tuesday that a meeting of producers on April 17 could still reach an agreement on freezing output, even without Iran.

That brought much relief to markets days after OPEC kingpin Saudi Arabia said it would only sign up if other major suppliers followed suit.

Sydney-listed energy giant Rio Tinto rose two percent while Woodside Petroleum gained 1.7 percent. In Tokyo, Inpex soared almost five percent and CNOOC was up 2.3 percent in Hong Kong.

Tokyo s Nikkei ended the morning session 0.3 percent lower, extending losses of more than eight percent seen in the previous seven sessions.

Hong Kong gained 0.1 percent, Sydney added 0.4 percent and Singapore 0.3 percent. Shanghai fell 0.9 percent.

Seoul slipped 0.3 percent with market heavyweight Samsung taking a hit despite reporting a better-than-forecast jump in first quarter operating profit.

– Dovish Fed hits dollar –

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Pharmaceutical companies followed their US and European counterparts higher after US giant Pfizer and Ireland-based Allergan withdrew their proposed $160 billion merger.

Pfizer blamed the collapse of the deal on new US rules cracking down on tie-ups aimed at saving on taxes.

In Tokyo, Eisai jumped 4.6 percent and Takeda Pharmaceutical gained 1.9 percent while in Shanghai Zhejiang Medicine put on four percent.

The dollar continued to struggle after the Fed minutes highlighted unease about lifting interest rate too soon owing to weakness in the global economy.

“The minutes from the meeting echoed the recent dovish comments by (Fed chief) Janet Yellen,” James Woods, a global investment analyst at Rivkin Securities in Sydney said in an email to clients, according to Bloomberg News.

“This is an important moment for the Federal Reserve as it highlights a change in weight given to global growth.”

He added that while prices were rising, it seemed policymakers “would rather exceed their two percent inflation target than risk pushing the US economy back into recession”.

The dollar slipped to 109.23 yen, its lowest since late 2014, while it also retreated against higher-yielding units.

The Australian dollar and oil-linked Malaysian ringgit each added one percent, while the Indonesian rupiah was up 0.4 percent. The New Zealand and Singapore dollars also climbed.