TOKYO (Reuters) – Asian equities advanced on Tuesday, putting global equities underway to extend its bullish run for the 12th consecutive session, as optimism about the global economic recovery and expectations of low interest rates boost investments in riskier assets.
Oil prices skyrocketed to a 13-month high as a deep freeze due to a heavy snowstorm in the United States not only boosted energy demand, but also threatened oil production in Texas.
The broader MSCI index for Asia Pacific stocks outside 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%, reaching its 32-month high in its first trading session since Thursday, after the Lunar New Year holiday.
Mainland China markets will remain closed on the holiday until Thursday, while Wall Street was also closed on Monday.
Ord Minnett adviser John Milroy said that while equity markets were positive, investors were becoming cautious about the future risk of inflation due to the central bank and government stimulus programs in place around the world.
“There is a clear feeling that rates will remain low for some time and investors’ appetite for shares will remain strong, we are likely to see the markets continue for some time,” Milroy told Reuters.
“Gaining momentum is the thought that inflation could rise much faster and earlier than the Fed is currently thinking. So, if they raise rates to fight it, what will happen to the stock markets and, of course, the bond markets. “
The optimistic view of the economy raised bond yields, with 10-year US Treasury bonds gaining 5 basis points to 1.245% at the start of Asian trading, the highest since late March.
Investors await the minutes of the January meeting of the US Federal Reserve, due to be published on Wednesday, to confirm their commitment to maintaining their dovish political stance in the near future. This, in turn, is set to control bond yields.
But some analysts say investors should be on the lookout for bond yields.
“If US bond yields continue to rise, this could start to destabilize stocks,” said Masahiro Ichikawa, chief strategist at Sumitomo Mitsui DS Asset Management.
The S & P500 futures were traded 0.65% higher to a record high and the MSCI global all-country index (ACWI), which has risen every day so far this month, has risen slightly.
The successful launch of COVID-19 vaccines in many countries is raising hopes for a greater recovery in economic activities hampered by a variety of anti-virus restrictions.
US President Joe Biden is pursuing his plan to inject $ 1.9 trillion in extra stimuli into the economy, in an additional boost to market sentiment.
Oil prices skyrocketed to their highest level in about 13 months, with a winter storm in the U.S. adding fuel to its recovery in hopes of a further recovery in demand.
US oil futures traded 1.1% higher at $ 60.11 a barrel.
Prices have risen in recent weeks due to tight supply, largely due to production cuts by the Organization of Petroleum Exporting Countries (OPEC) and producers allied with the broader group of OPEC + producers.
The rise in oil prices supported currencies linked to commodities, such as the Canadian dollar, while safe haven currencies, including the US dollar, were in the background.
The pound sterling held steady at $ 1.3910, remaining at its highest levels since April 2018.
The Chinese offshore yuan hit its highest 2.5-year high of 6.4010 per dollar overnight and the latest was 6.4030.
MSCI’s emerging market 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, out of its $ 49,715 record set on Sunday.
Additional reporting by Tomo Uetake in Sydney; Editing by Shri Navaratnam