SYDNEY (Reuters) – Asian equity markets rose on Monday as expectations for faster economic growth and inflation beat bonds globally and increased commodities, although rising real yields made stock valuations appear higher. stretched in comparison.
The broader MSCI index of Asia-Pacific equities outside of Japan added 0.2%, after breaking a record high last week, while the jump in US bonds produced unconditional investors.
The Japanese Nikkei recovered 1.0%, and South Korea 0.4%, but the Chinese lost 1.2%.
The S&P 500 and EUROSTOXX 50 futures both hesitated around flat, while FTSE futures fell 0.6%.
Bonds have been shattered by the prospect of a stronger economic recovery and a larger loan as President Joe Biden’s $ 1.9 trillion stimulus package progresses.
“Yield curves have continued to worsen as COVID infection rates continue to fall, plans are being reopened and a large package of US fiscal incentives appears likely,” said Christian Keller, head of research. Barclays.
“This, in principle, indicates a better medium-term growth outlook for the US and beyond, as other core yield curves are moving in the same direction,” he added. “Meanwhile, central banks appear to be looking at rising inflation this year, keeping the curve front anchored.”
Federal Reserve Chairman Jerome Powell is giving his six-month testimony to Congress this week and is likely to reiterate his commitment to keeping policy very light for as long as is necessary to raise inflation.
European Central Bank President Christine Lagarde is also expected to appear inappropriate in a speech later Monday.
Yields on 10-year treasury bills have already reached 1.38%, exceeding the psychological level of 1.30% and bringing the increase so far to 43 steep basis points.
Analysts at BofA noted that 30-year bonds have returned -9.4% year-on-year so far, the worst start since 2013.
“Real assets outperform large financial assets in ’21 because cyclical, political and secular trends say inflation is higher,” analysts said in a note. “Growing goods, fashionable energy delays, materials in secular eruptions.”
A COPPER PLATED RECOVERY
One star was copper, a key component of renewable technology, which rose 7.7 percent last week to a nine-year high. Even the broader LMEX base metals index rose 5.5% in the week.
Oil prices continued to travel, helped by tightening reserves and icy weather, with Brent gaining 22% for the year so far. [O/R]
Earlier Monday, Brent crude futures rose another 50 cents to $ 63.41 a barrel, while U.S. oil added 45 cents to $ 59.69.
All this has been an advantage for commodity-related currencies, and the Canadian, Australian and New Zealand dollars have risen sharply for the year so far.
The pound reached a three-year high of $ 1.4050, helped by one of the fastest vaccine launches in the world. British Prime Minister Boris Johnson is to point out a way to block COVID-19 months.
The US dollar index was relatively limited, with downward pressure on the country’s expanding twin deficits, balanced by higher bond yields. The index was last at 90,341, not far from where the year started at 90,260.
Rising treasury yields helped the dollar gain somewhat against the yen to 105.60, as the Bank of Japan actively restricts home yields.
The euro was steady at $ 1.2128, correlated between support at $ 1.2021 and resistance around $ 1.2169.
One commodity that is not doing so well is gold, partly due to rising bond yields and partly because investors are wondering if cryptocurrencies could be a better hedge against inflation. [GOL/]
The precious metal rose to $ 1,786 an ounce after starting the year at $ 1,896. Bitcoin fell 1.8% on Monday to $ 56,403, but started the year at $ 19,700.
Edited by Shri Navaratnam