SYDNEY (Reuters) – Asian equities rebounded from previous losses on Tuesday, offset by firmer US stock futures and central bank comments aimed at allay fears of rising bond yields and inflation.
A drop in US bond yields also benefited equity markets.
Japan’s Nikkei rose 1.02% on Tuesday afternoon, while MSCI’s widest index of Asia-Pacific stocks outside Japan was 0.10% higher.
Chinese blue chips added 0.03% after hitting their lowest level earlier this year.
Deputy Governor Chen Yulu of the People’s Bank of China told Yicai Global that China’s money supply would only grow to match GDP growth and that the country’s central bank saw no need for major stimulus support in the next five years. [bit.ly/3btQ11P]
NASDAQ futures bounced 1.1% and S&P 500 futures 0.73%. However, European futures were slightly lower, with EUROSTOXX 50 futures down 0.13% and FTSE futures down 0.25%.
“I suspect this is the better tone in Asia,” Stephen Miller, market strategist for GSFM Funds Management, referring to US futures and the central bank’s comments.
“From time to time, calming comments from officials – be they PBOC officials, or Fed Reserve, ECB, or Reserve Bank of Australia officials – could calm the markets, but I think all of these things would turn out to be momentary. if US bond yields continue to rise, and I think there is a significant risk of that. ”
Miller added that easing US 10-year Treasury yields also helped sentiment.
US Treasury Secretary Janet Yellen said on Monday that President Joe Biden’s aid package for coronavirus would provide enough resources to fuel a “very strong” economic recovery in the US, noting that “there are tools” to cope with inflation.
Despite the positive signs, investors remain in conflict over whether the stimulus will help global growth recover faster from the downturn of COVID-19 or cause the world’s largest economy to overheat and lead to runaway inflation .
“The likelihood of seeing more inflation in the economy is greatly increased by the monetary and fiscal policies that we see around the world,” Goldman Sachs Chief Executive Officer David Solomon told a webcast at a conference in Sydney.
“There is certainly a reasonable result where inflation is accelerating faster than people expect, and that will clearly have an impact on the markets and volatility.”
The technology sector and other richly valued companies are very sensitive to the rising rates.
Australian stocks tracked gains on Wall Street overnight, with the main S & P / ASX 200 index up a whopping 1.04% on Tuesday. However, Australian technology stocks fell for the sixth consecutive session, in line with their US counterparts.
The index returned that gain to be only 0.48% higher during afternoon trading, following the downturn in technology. Hong Kong’s Hang Seng rose 1.4%, while South Korea’s KOSPI fell 0.74%.
US economic data pointed to a continued recovery as the Department of Commerce said wholesale inventories rose sharply in January despite a surge in sales, suggesting inventory investment could once again contribute to growth in the first quarter.
On Wall Street, the Dow rose overnight while the Nasdaq lost more than 2%, marking a decline of more than 10% since the February 12th high and confirming a correction in the index’s value.
The Dow Jones Industrial Average rose 0.97%, the S&P 500 lost 0.54% and the Nasdaq Composite fell 2.41%.
“If interest rates get higher because people get bullish about what economic growth looks like, it’s still good for stock prices,” said Tom Hainlin, global investment strategist at US Bank Wealth Management’s Ascent Private Wealth Group in Minneapolis.
US Treasury yields have risen as investors see higher inflation rates and a more positive outlook for the US economy as it emerges from the coronavirus pandemic.
In the forex markets, the dollar index held up near a 3-1 / 2 month high against its rivals as expectations of a faster economic normalization of the pandemic in the United States put the currency in an advantage. The euro rose 0.1% to $ 1,185.
Oil prices rose on Tuesday, helped by a likely drop in crude oil inventories in the United States, the world’s largest fuel consumer.
Brent crude futures were up 56 cents, or 0.82%, to $ 68.80 a barrel. US crude oil futures were up 50 cents or 0.75% at $ 65.55.
Spot gold added 0.4% to $ 1,687.66 an ounce.
Reporting by Paulina Duran in Sydney and Matt Scuffham in New York; Edited by Christian Schmollinger and Jacqueline Wong