Most Asia markets up again after Wall St surge, stimulus in view

Asian markets mostly advanced again Tuesday, building on a global rebound from last week’s rout as concerns about rising bond yields subsided and investors turned their attention back to the improving economic outlook and improving vaccine rollouts.

US lawmakers’ push to get Joe Biden’s huge stimulus through Congress in the next two weeks was also lifting spirits on trading floors, with Wall Street providing a powerful lead driven by a rally in tech firms.

A ramping up of immunisations, falling infection rates, government and central bank support and the easing of lockdown measures have fanned expectations that the global economy will enjoy a blistering recovery this year and next, helping propel equities to record or multi-year highs.

But the bright-eyed optimism has given way in recent weeks to worries that the so-called reflation trade will send inflation soaring and force officials at the Federal Reserve and elsewhere to wind in their ultra-easy monetary conditions, including lifting interest rates.

And the rise of yields in government bonds in the US and other key economies last week sparked a mini equity markets meltdown, which was exacerbated by profit-taking as investors considered some gains to have run a little too far.

However, a stabilisation in the bond market Friday and Monday appeared to have staunched the bleeding for now, while analysts said worries over a surge in inflation and rate cuts were overdone.

And in an interview, top Fed official Thomas Barkin reiterated the message from his bank colleagues that the rise in yields was nothing to be worried about.

“In fact, I would be disappointed if we didn’t see yields… rise as the outlook improves,” he told the Wall Street Journal in an interview.

“If the driver is — as it seems to be — news about vaccines, or news about the health of the economy, or news about fiscal stimulus, then I think it’s a natural reaction.”

Ship on an even keel
Julia Coronado, founder of MacroPolicy Perspectives, said: “There’s nothing wrong with longer term interest rates where they are; financial conditions broadly are still fairly easy.”

Seoul led Asia’s gains, jumping more than two percent, while Hong Kong, Sydney, Singapore, Wellington, Taipei, Jakarta and Manila were all in positive territory, though Tokyo and Shanghai struggled to maintain early momentum and dipped.

That came after a surge on Wall Street that saw the Nasdaq pile on more than three percent as tech firms such as Apple, which have been hit by selling as they are more susceptible to higher interest rates, being snapped up. Adding to the upward pressure for markets was news showing US factory activity expanded last month at its quickest pace in three years.

“It’s amazing what a weekend time-out can do to right the ship… as bond markets rowed back into calmer waters on Monday,” said Axi strategist Stephen Innes, adding that the approval of Johnson & Johnson’s one-jab vaccine the United States had also provided major support.

Eyes are now on Washington, where the Senate is due to debate Biden’s economic rescue package after it passed the House at the weekend.

“The Senate will take up the American Rescue Plan this week,” Senate Majority Leader Chuck Schumer said. “I expect a hearty debate and some late nights but the American people sent us here with a job to do.”

Democrats want to adopt the text before March 14, extended unemployment benefits from a previous aid plan expire.

Oil prices extended Monday’s losses ahead of a meeting of OPEC and other top producers this week where they will debate winding back output cuts that have been in place for the best part of a year as they eye prices at 13-month highs.

Key figures around 0230 GMT
Tokyo – Nikkei 225: DOWN 0.4 percent at 29,554.75 (break)

Hong Kong – Hang Seng: UP 0.5 percent at 29,584.16

Shanghai – Composite: DOWN 0.1 at 3,547.50

Euro/dollar: DOWN at $1.2033 from $1.2050 at 2130 GMT

Pound/dollar: DOWN at $1.3901 from $1.3925

Euro/pound: UP at 86.56 pence from 86.51 pence

Dollar/yen: UP at 106.82 yen from 106.76 yen

West Texas Intermediate: DOWN 1.4 percent at $59.79 per barrel

Brent North Sea crude: DOWN 1.3 percent at $62.84 per barrel

New York – Dow: UP 2.0 percent at 31,535.51 (close)

London – FTSE 100: UP 1.6 percent at 6,588.53 (close)