SYDNEY (Reuters) – Asian equities rallied on Monday as the dollar remained at three-month highs after the US Senate adopted a $ 1.9 trillion stimulus bill bode well for a global economic recovery , although it also put new pressure on the Treasury.
There was also optimistic news in Asia, as China’s exports rose 155% in February compared to a year earlier, when much of the economy was shut down to fight the coronavirus.
BofA analyst Athanasios Vamvakidis argued that the strong mix of US stimulus, faster reopening and higher firepower for consumers was a clear positive for the dollar.
“Including the current proposed stimulus package and an addition to an infrastructure bill in the second half, total US fiscal support is six times higher than the EU’s recovery fund,” he said. “The Fed also supports the growth of the US money supply twice as fast as the euro area.”
The prospect of even faster growth helped MSCI’s broadest Asia-Pacific stock index outside the Japanese company 0.5%. The Japanese Nikkei won 0.9%, and the Chinese blue chips 0.7%.
The S&P 500 futures rose 0.3% after a sharp change on Friday. EUROSTOXX 50 futures lagged behind Wall Street by 1.2% and FTSE by 1.3%.
Equity investors took heart from US data showing non-farm payrolls rose 379,000 jobs last month, while the unemployment rate fell to 6.2% in a positive sign for corporate income, spending and earnings.
US Treasury Secretary Janet Yellen tried to counter inflation concerns, noting that the real unemployment rate was approaching 10% and that there was still a lot of weakness in the labor market.
However, 10-year US Treasury yields reached a one-year high of 1.625% as a result of the data and stood at 1.59% on Monday. Yields rose 16 basis points for the week, while German yields fell 4 basis points.
The European Central Bank is meeting on Thursday amid talks that it will protest against the recent rise in eurozone yields and may look at ways to halt further growth.
The divergent trajectory of yields stimulated the dollar against the euro, which fell to a three-month low of $ 1.1892 and was last set at $ 1.1926.
Ned Rumpeltin, European head of FX strategy at TD Securities, said breaking the $ 1.1950 chart support was a downward development that targeted $ 1.1800.
“The strong US employment report could be the last missing piece in the stronger USD narrative,” he added. “This should put the dollar in a much stronger position than other major currencies.”
The dollar index rose accordingly to unprecedented levels since the end of November and was last at 91.897, well above its last low of 89.677.
It also won the low-yielding yen, hitting a nine-month high of 108.63 and changing hands last time at 108.40.
The yield jump weighed on gold, which offers no fixed return, and left it at $ 1,713 an ounce and even over the nine-month low.
Oil prices have risen to their highest levels in more than a year after Yemen’s Houthi forces launched drones and missiles into the heart of Saudi Arabia’s oil industry on Sunday, raising concerns about production.
Prices had already been supported by a decision by OPEC and its allies not to increase supply in April. [O/R]
Brent rose $ 1.70 a barrel to $ 71.06, while US crude rose $ 1.63 to $ 67.72 a barrel.
Reporting by Wayne Cole; Mountain by Sam Holmes