Asia stocks extend rally in early trade, oil holds gains

Asian stocks rallied again Monday and oil held on to last week`s rally as investors bet on central bank stimulus measures to support markets after witnessing a bloodbath at the start of the year.

Having set the tone for global trading floors Friday with sharp gains, regional dealers took up the mantle again in early exchanges, with Hong Kong, Shanghai and Tokyo leading the charge.

Energy firms were among the biggest winners after oil prices surged 10 percent on Friday, halving the losses suffered so far in 2016 that have been a key cause of the global market rout.

However, while analysts said the snapback - after three weeks of heavy selling - was due, they warned that the volatility that has infected markets from Asia to the Americas would likely continue.

The rally comes at the start of a full week of market-moving news, including policy meetings by the US and Japanese central banks.

There will be close scrutiny of the Bank of Japan after a report last week said policymakers were considering ramping up its already vast stimulus programme to fend off the threat of deflation that has been exacerbated by the oil crisis.

That came a day after the head of the European Central Bank, Mario Draghi, said he would consider further easing the lender`s own monetary policy.

There is also increasing speculation the Federal Reserve will hold off another interest rate rise for now, having hiked the cost of borrowing in December for the first time in a decade.

"There will be some waiting and seeing among policy makers until they know how this market volatility will affect the global economy," Michael McCarthy, chief strategist at CMC Markets in Sydney, told Bloomberg News.

"Given the depression in the markets, there’s scope for the market to add to Friday’s gains. We`ve got a very eventful week, with the BoJ and Fed meetings, so there’s a lot for investors to react to. Volatility is likely to continue."

In early trade, Hong Kong stocks were 1.6 percent higher, Tokyo gained 1.4 percent by lunch and Shanghai added 0.6 percent. Sydney jumped 1.5 percent, while Singapore and Seoul put on around one percent.

There were also healthy advances for Manila, Taipei, Wellington and Jakarta.

Oil prices edged up, with US benchmark West Texas Intermediate and Brent each up 0.2 percent.

On Friday Brent gained 10 percent and WTI nine percent.

Among energy firms to benefit, Hong Kong-listed CNOOC added five percent and PetroChina was four percent up. And in Sydney, Woodside Petroleum and Santos both put on 4.4 percent.