TOKYO / NEW YORK (Reuters) – Asian equities rebounded from a two-month low on Wednesday after global bond yields plummeted following a well-received US debt auction and as Chinese equities gained a foothold following recent plunges amid concerns about policy tightening.
A recent sell-off in global bonds has made markets generally uneasy, as concerns from central banks could begin to tighten the monetary pivot, pushing up interest rates, raising concerns that higher funding costs could make a fragile global could derail recovery.
Japan’s Nikkei had changed little, while MSCI’s ex-Japan Asia-Pacific stock index rose 0.2% a day after it hit its two-month low. The CSI300 index of mainland China A shares rose 0.4%.
Despite this, European and US stocks declined slightly as investors remained nervous about a bond bear run ahead of key inflation data and bond auctions in the United States.
Euro Stoxx 50 futures fell 0.3%, while UK FTSE futures were down 0.7%.
Gains in Asian equities came after Chinese equities fell to their lowest level since mid-December the previous day, in the face of tighter policies and a slowing economic recovery.
“Markets devote all their attention to bonds. As earnings are not growing that fast right now, the high stock prices we have now will become unsustainable if bond yields continue to rise and undermine their valuation, ”said Hiroshi Watanabe, senior economist at Sony Financial Holdings.
Benchmark 10-year bond yields fell to 1.540%, peaking at 1.626% on Friday, after Tuesday’s auction of $ 58 billion worth of US 3-year bonds was well received.
Still, many market investors have remained tense, with the following tests of investors’ interest in government debt set to take place later this week in the form of 10- and 30-year auctions.
“While the bond market has stabilized a bit, the pressure will remain,” said Naokazu Koshimizu, senior interest rate strategist at Nomura Securities.
“It priced in the future normalization of the Fed’s monetary policy, and the Fed’s policy eventually became neutral. But it has not yet priced in the chance of a tighter policy. “
Some investors see a real risk of an overheated US economy and higher inflation as a result of planned spending by US President Joe Biden’s administration, including a $ 1.9 trillion stimulus and an even larger infrastructure initiative.
US consumer price data to be expected at 1330 GMT is expected to show a slight acceleration in overall inflation in February, with analysts expecting further gains in the coming months on the back of base effects from a severe economic downturn in early 2020.
The faster rollout of COVID-19 vaccines in some countries and the planned US stimulus package helped support a better global economic outlook, the Organization for Economic Co-operation and Development said in raising its growth forecast for 2021.
Some investors are concerned that a lenient monetary policy could trigger inflation, although Jerome Powell, chairman of the Federal Reserve, has so far pledged to keep interest rates low and maintain his $ 120 billion monthly bond purchase.
In the currency markets, the dollar was supported by expectations of a faster economic recovery in the US.
The euro fell 0.25% to $ 1.1871, not far from Tuesday’s 3 1/2 months low of $ 1.18355. The yen changed hands at 108.85 per dollar after hitting a nine-month low of 109,235 the previous day.
The Australian dollar lost 0.6% to $ 0.7672 after the country’s largest central banker rejected market chatter about early rate hikes. [AUD/]
Oil prices fell as concerns about a disruption in supplies to Saudi Arabia eased.
US crude oil futures fell 0.9% to $ 63.44 a barrel, away from a nearly 2 1/2 year high of $ 67.98 touched Monday.
Brent crude oil futures fell 1.1% to $ 66.78 a barrel.
Reporting by Hideyuki Sano in Tokyo and Matt Scuffham in New York; Adaptation by Sam Holmes, Richard Pullin and Ana Nicolaci da Costa