Asia sets global stocks for bull run extended by economic optimism

TOKYO (Reuters) – Asian stocks advanced on Tuesday, putting global stocks on track to extend their bull run for the 12th straight session as optimism about the global economic recovery and low interest rate expectations propel investment in riskier assets.

FILE PHOTO: Photographers take photos near a large screen showing stock prices on the Tokyo Stock Exchange (TSE) after the market opens in Tokyo, Japan, on October 2, 2020. REUTERS / Kim Kyung-hoon

Oil prices soared to a 13-month high due to a freeze due to a severe snowstorm in the United States, not only boosting energy demand but also threatening oil production in Texas.

MSCI’s broader Asia Pacific stock index outside of Japan rose 0.45%, while Japan’s Nikkei rose 0.4% to a 30-year high.

In Hong Kong, the Hang Seng Index rose 1.79% to hit a 32-month high in its first trading session since the Thursday following the Lunar New Year holidays.

The mainland Chinese markets will remain closed during the holidays until Thursday, while Wall Street was also closed on Monday.

Ord Minnett’s adviser John Milroy said that while equity markets were positive, investors were becoming wary of future inflation risk due to central bank and government stimulus programs in place around the world.

“There is a clear sense that rates are staying low for some time and investor appetite for equities remains strong, we are likely to see the markets hold for some time,” Milroy told Reuters.

“The idea is gaining ground that inflation could rise much faster and earlier than the Fed currently thinks. So if they raise rates to combat it, what will happen to the stock markets and, of course, the bond markets? ”.

The bullish outlook on the economy boosted bond yields, with 10-year US Treasuries gaining 5 basis points to 1,245% in early Asian trading, their highest level since late March.

Investors are looking at the minutes of the US Federal Reserve’s January meeting, due to be released on Wednesday, to confirm its commitment to maintaining its dovish policy stance in the near future. That, in turn, is set up to control bond yields.

But some analysts say investors should keep an eye on bond yields.

“If US bond yields continue to rise, that could start to disrupt stocks,” said Masahiro Ichikawa, chief strategist at Sumitomo Mitsui DS Asset Management.

S & P500 futures rose 0.65% to a record high and the MSCI All Countries World Index (ACWI), which has risen every day so far this month, rose slightly.

The successful launches of COVID-19 vaccines in many countries are raising hopes for a further recovery in economic activities hampered by a variety of virus restrictions.

US President Joe Biden is pushing ahead with his plan to inject an additional $ 1.9 trillion stimulus into the economy, a further boost to market sentiment.

Oil prices soared to their highest level in about 13 months as a winter storm in the US added fuel to their rally in hopes of a further recovery in demand.

US crude futures rose 1.1% to $ 60.11 a barrel.

Prices have recovered in recent weeks due to tight supplies, largely due to production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and allied producers in the broader group of OPEC + producers.

Rising oil prices supported commodity-linked currencies like the Canadian dollar, while safe-haven currencies, including the US dollar, took a back seat.

The British pound held firm at $ 1.3910, remaining at its highest levels since April 2018.

The offshore Chinese yuan hit a two-and-a-half-year high of 6.4010 per dollar overnight and last stood at 6.4030.

The MSCI Emerging Markets Currency Index also hit a record high.

The yen weakened to 105.36 per dollar, approaching its four-month low of 105.765 set on February 5, while the euro rose 0.1% to $ 1.2142.

In Asia, Bitcoin was trading at $ 48,088.28, down from its record of $ 49,715 reached on Sunday.

Additional information from Tomo Uetake in Sydney; Edited by Shri Navaratnam


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