Asia markets track Wall St record as inflation fears ease

Asian markets ticked higher Thursday as inflation concerns eased, allowing investors to focus on the global recovery and progress in fighting the coronavirus pandemic.

Investors were given a positive lead from Wall Street, where the Dow ended at a new record, helped by news that Joe Biden’s stimulus had cleared its last hurdle in Congress, as expected, meaning he can sign it into law before the weekend, pumping almost $2 trillion into the economy.

Fears that a strong rebound in world growth this year will cause a surge in inflation that forces the Federal Reserve and other central banks to wind back their ultra-loose monetary policies — including record-low interest rates — have fuelled a sell-off across risk assets in recent months.

But data Wednesday showing US prices rose slightly less than expected in February soothed those concerns, with the main diver of the increases being food and energy costs.

That came as a closely watched auction of benchmark US 10-year Treasuries went off without any problems with the notes selling at a yield broadly in line with expectations.

Worries about a surge in inflation have lifted US yields to around one-year highs, while a weak sale of seven-year bonds sparked a stock market sell-off. Yields rise as prices fall.

“For now there is nothing for the inflationistas to ring the alarm, while at the same time it provides the Fed plenty of breathing space ahead of its meeting next week,” said National Australia Bank’s Rodrigo Catril.

The inflation data “suggests the music will keep playing for some time, with the Fed not even close to pondering the option of watering down the punchbowl”.

He said the consumer price index will naturally jump next month owing to the low base effect from last year.

Asian markets were positive Thursday, taking their lead from Wall Street, as well as a third straight record in Frankfurt and a one-year high for Paris.

Hong Kong, Shanghai and Taipei all rose more than one per cent while Seoul jumped two per cent. Tokyo, Singapore, Wellington also rose while Sydney was flat, though Manila dipped. The healthy US data came as the House of Representatives passed Biden’s economic rescue package, which will plant up to $1,400 into struggling Americans’ pockets, expend unemployment benefits, boost healthcare funding and ramp up vaccine distribution.

Eyes are now on the European Central Bank’s policy meeting later in the day, which will be followed for its outlook on interest rates and its vast bond-buying programme as the world economy recovers from last year’s collapse.

The Fed holds its gathering next week, which Axi’s Stephen Innes said “could provide a trigger for a renewed selloff in US rates” if policymakers continue to brush off the rise in bond yields.

Key figures around 0230 GMT
Tokyo – Nikkei 225: UP 0.5 per cent at 29,179.84 (break)

Hong Kong – Hang Seng: UP 1.4 per cent at 29,318.45

Shanghai – Composite: UP 1.7 per cent at 3,412.61

Euro/dollar: UP at $1.1934 from $1.1932 at 2220 GMT

Pound/dollar: UP at $1.3939 from $1.3928

Euro/pound: UP at 85.62 pence from 85.60 pence

Dollar/yen: UP at 108.51 yen from 108.38 yen

West Texas Intermediate: UP 0.8 per cent at $64.93 per barrel

Brent North Sea crude: UP 0.7 per cent at $68.40 per barrel

New York – Dow: UP 1.5 per cent at 32,297.02 (close)

London – FTSE 100: DOWN 0.1 per cent at 6,725.60 (close)