SYDNEY (Reuters) – Asian stocks rebounded from previous losses on Tuesday, driven by firmer US equity futures and central bank comments aimed at allaying fears about rising bond yields and inflation.
A pullback in US bond yields also boosted equity markets.
Japan’s Nikkei rallied 1.02% Tuesday afternoon, while MSCI’s broader Asia-Pacific equity index outside of Japan rose 0.10%.
Chinese blue chips added 0.03%, after hitting their lowest level this year.
People’s Bank of China Deputy Governor Chen Yulu told Yicai Global that China’s money supply will grow only to match GDP growth and that the country’s central bank sees 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%. European futures fell slightly, however, EUROSTOXX 50 futures were down 0.13% and FTSE futures a further 0.25%.
“I suspect that’s what’s leading the best tone in Asia,” said Stephen Miller, market strategist at GSFM Funds Management, referring to US futures and the central banker’s remarks.
“From time to time, reassuring comments from officials, whether they are officials at the BPC, the Federal Reserve, the ECB or the Reserve Bank of Australia, can calm the markets, but I think all of those things would prove short-lived if they US bond yields continue to rise. and I think there is a significant risk of that happening. “
Miller added that a easing in 10-year US Treasury yields also helped sentiment.
US Treasury Secretary Janet Yellen said Monday that President Joe Biden’s coronavirus aid package would provide sufficient resources to drive a “very strong” US economic recovery, noting that “there are tools” to cope. to inflation.
Despite the positive signs, investors remain in conflict over whether the stimulus will help global growth recover more quickly from the COVID-19 recession or cause the world’s largest economy to overheat and lead to runaway inflation.
“The possibility that we will see more inflation in the economy is significantly increased by the monetary policy actions and the fiscal policy actions that we are seeing around the world,” Goldman Sachs CEO David Solomon said at a conference in Sydney. via webcast.
“There is certainly a reasonable outcome where inflation accelerates faster than people expect, and that will obviously have an impact on markets and volatility.”
The tech sector and other high-value companies have been highly susceptible to rate hikes.
Australian stocks posted overnight gains on Wall Street with the leading S & P / ASX 200 index climbing as much as 1.04% on Tuesday. However, Australian tech stocks fell for the sixth straight session in line with their US peers.
The index returned those gains to be just 0.48% higher in afternoon trading following the technology downturns. Hong Kong’s Hang Seng advanced 1.4%, while South Korea’s KOSPI fell 0.74%.
Economic data from the United States pointed to a continued recovery, as the Commerce Department said wholesale inventories rose solidly in January despite an increase in sales, suggesting that inventory investment could again contribute to growth in the first trimester.
On Wall Street, the Dow advanced overnight, while the Nasdaq lost more than 2%, marking a drop of more than 10% from its closing high of February 12 and confirming a correction in the value of the index.
The Dow Jones Industrial Average rose 0.97%, the S&P 500 lost 0.54% and the Nasdaq Composite fell 2.41%.
“If rates are going up because people are getting optimistic about what economic growth looks like, that continues to support equity prices,” said Tom Hainlin, global investment strategist at US Bank Wealth Management’s Ascent Private Wealth Group at Minneapolis.
US Treasury yields have advanced as investors value higher inflation and more optimistic outlook for the US economy as it emerges from the coronavirus pandemic.
In currency markets, the dollar index held close to a three-and-a-half-month high against its rivals as expectations of a faster economic normalization of the pandemic in the United States put the currency ahead. The euro was up 0.1% at $ 1.185.
Oil prices rose on Tuesday, helped by a likely reduction in crude inventories in the United States, the world’s largest consumer of fuels.
Brent crude futures rose 56 cents, or 0.82%, to $ 68.80 a barrel. US crude futures were 50 cents, or 0.75% higher, 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; Editing by Christian Schmollinger and Jacqueline Wong