Asian Stocks Up After U.S. Rally; Bond Yields Jump

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Asian stocks rose Friday after U.S. shares rallied and sovereign bond yields surged on economic optimism and easing fears of contagion from China Evergrande Group’s debt crisis.

Equities climbed in Japan and South Korea and were steady in Australia. U.S futures edged up after the S&P 500’s biggest two-day gain since July. The Wall Street advance was led by economically-sensitive sectors like energy and financials, as investors embraced the view that a looming reduction in Federal Reserve stimulus shows confidence in the recovery from the pandemic.

The prospect of tighter monetary policy spurred a global selloff in bonds. Long-term Treasury yields surged the most in 18 months as traders brought forward their expectations for the first Fed rate hike to the end of 2022. The Bank of England opened the door to a 2021 rate increase, pushing down 10-year gilts. Yields also jumped on sovereign debt in Australia and New Zealand.

The dollar held a decline and oil sustained an advance. While the concerns about contagion radiating from Evergrande have receded somewhat, it remains unclear if Beijing plans to manage fallout from any potential default. The developer is buckling under more than $300 billion of liabilities amid China’s crackdown on property-sector leverage.

Stocks rise with bond yields in sign of more confidence about economic outlook

Equity investors are taking heart from predictions that the delta virus strain and pandemic-related supply-chain snarls will deal only a temporary setback to economic reopening. Central banks have also pledged to withdraw stimulus gradually. But a continuing rise in long-term borrowing costs could be a risk to the upbeat picture if it ends up denting confidence in recovery prospects.

Clarity from the Fed has allowed risk assets to flourish, Elaine Stokes, a portfolio manager at Loomis Sayles & Co., told Bloomberg Television, adding that “what they did is tell us that they feel really good about the economy.”

Here are key events to watch this week:

  • Fed Chair Jerome Powell, Fed Governor Michelle Bowman and Vice Chairman Richard Clarida discuss pandemic recovery, Friday

Here are the main moves in markets:

Stocks

  • S&P 500 futures increased 0.1% as of 9:08 a.m. in Tokyo. The S&P 500 rose 1.2%
  • Nasdaq 100 futures were steady. The Nasdaq 100 rose 0.9%
  • Japan’s Topix index climbed 1.9%
  • Australia’s S&P/ASX 200 index was flat
  • South Korea’s Kospi added 0.2%
  • Hang Seng futures dipped 0.3% earlier

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro was at $1.1745
  • The Japanese yen was at 110.33 per dollar
  • The offshore yuan was at 6.4605 per dollar

Bonds

  • The yield on 10-year Treasuries held at 1.43%
  • Australia’s 10-year bond yield increased 11 basis points to 1.37%

Commodities

  • West Texas Intermediate crude was at $73.19 a barrel, down 0.2%
  • Gold was at $1,746.69 an ounce, up 0.2%
Source Bloomberg

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