SYDNEY (Reuters) – Asian stocks rebounded Monday as the dollar held highs for nearly three months after the US Senate passed a $ 1.9 trillion stimulus bill, boding well for a global economic recovery, although it also brought fresh pressure the treasury bill.
There was also positive news in Asia, as Chinese exports rose 155% in February compared to a year earlier, when much of the economy was shut down to fight the coronavirus.
BofA analyst Athanasios Vamvakidis argued that the strong mix of US stimulus, faster reopening and increased consumer firepower was a clear positive for the dollar.
“Including the current proposed stimulus package and further up from a second-half infrastructure bill, total US fiscal support is six times greater than the EU’s recovery fund,” he said. “The Fed is also backing with the US money supply growing twice as fast as the Eurozone.”
The prospect of even faster growth helped MSCI’s widest index of Asia-Pacific stocks outside of the Japanese company 0.5%. The Japanese Nikkei won 0.9% and the Chinese blue chips 0.7%.
S&P 500 futures are up 0.3% after a sharp turnaround on Friday. EUROSTOXX 50 futures overtook Wall Street by up 1.2% and FTSE futures 1.3%.
Equity investors took heart from US data showing that nonfarm payrolls rose 379,000 jobs last month, while the unemployment rate fell to 6.2%, which is a positive sign for incomes, expenses and corporate profits.
US Treasury Secretary Janet Yellen tried to address inflation concerns by noting that the actual unemployment rate was closer to 10% and that there was still a lot of slack in the labor market.
Still, in the wake of the data, 10-year US Treasury yields still hit a one-year high of 1.625%, reaching 1.59% on Monday. Interest rates rose 16 basis points this week, while German rates even fell 4 basis points.
The European Central Bank will meet on Thursday amid a talk that it will protest the recent hike in euro-zone yields and perhaps consider ways to curb further gains.
The diverging interest rate trajectory boosted the dollar against the euro, which dropped to a three-month low of $ 1.1892, and was last locked at $ 1.1926.
Ned Rumpeltin, European Head of FX Strategy at TD Securities, said the chart support break at $ 1.1950 was a bearish development targeting $ 1.1800.
“The solid US employment report could be the last missing piece of the stronger USD story,” he added. “This should put the dollar in a much stronger position against other major currencies.”
The dollar index shot up significantly to levels not seen since late November, last standing at 91,897, well above its recent low of 89,677.
It also gained on the low yielding yen, hitting a nine-month high of 108.63, and last changing hands at 108.40.
The increase in yields weighed on gold, which offers no fixed return, leaving it behind at $ 1,713 an ounce and just above its nine-month low.
Oil prices soared at their highest levels in more than a year after Yemeni Houthi forces fired drones and rockets into the heart of Saudi Arabia’s oil industry on Sunday, raising concerns about production.
Prices were already supported by a decision by OPEC and its allies not to increase the offer in April. [O/R]
Brent climbed $ 1.70 a barrel to $ 71.06, while US crude oil rose $ 1.63 to $ 67.72 a barrel.
Reporting by Wayne Cole; Editing by Sam Holmes