© Reuters. ARCHIVE PHOTO: A man wearing a face mask passes through a screen that displays a graph showing the average participation of recent Nikkeis outside a brokerage house, amid the outbreak of coronavirus disease (COVID-19) in Tokyo
By Wayne Cole
SYDNEY (Reuters) – Asian stock markets rose on Monday as expectations of faster economic growth and inflation around the world hurt bonds and boosted commodities, while rising real yields also stock valuations seem more strained in comparison.
The broader MSCI index for Asian Pacific equities outside Japan rose 0.1% after falling from a record at the end of last week as the jump in US bond yields unsettled investors.
recovered 1.0% and South Korea 0.4%, while the E-Mini futures were a firmer fraction.
The bonds were hurt by the prospect of a stronger economic recovery and even more borrowing as President Joe Biden’s $ 1.9 trillion stimulus package moves forward.
“Yield curves have continued to tilt as COVID infection rates drop further, reopening plans are discussed and a large US fiscal stimulus package looks likely,” said Christian Keller, Barclays (LON 🙂 ‘head of economic research.
“This, in principle, signals 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 seem ready to analyze rising inflation this year, keeping the short end of the curves anchored.”
Federal Reserve President Jerome Powell gives his semestral testimony to Congress this week and will likely reiterate his commitment to keeping the policy super easy for as long as it takes to raise inflation.
European Central Bank President Christine Lagarde is also expected to sound peaceful in a speech on Monday.
Yields have already reached 1.36%, breaking the psychological level of 1.30% and taking the year-to-date hike up to a steep 41 basis points.
BofA analysts note that 30-year bonds have returned -9.4% in the year so far, the worst start since 2013.
“Real assets are outpacing financial assets by 21, as cyclical, political and secular trends indicate higher inflation,” analysts said in a note. “Rising goods, energy laggards in vogue, materials in secular leaks.”
A COPPER RECOVERY
One of the stars was, a key component of renewable technology, which shot up 7.7% last week to a nine-year peak. Even the broadest LMEX base metals index rose 5.5% in the week.
Oil prices followed the rise, helped by tight supply and freezing weather, giving Brent gains of 21% so far this year. [O/R]
Earlier on Monday, futures were up 43 cents to $ 63.34 a barrel, while raising 11 cents to $ 59.35 a barrel,
All of this has been a blessing for commodity-indexed currencies, with Canadian, Australian and New Zealand dollars rising sharply in the year so far.
The pound sterling also hit a three-year record above $ 1,400, aided by one of the fastest vaccine implementations in the world. British Prime Minister Boris Johnson is expected to chart a course from the COVID-19 blockades on Monday.
The has been relatively limited, with downward pressure on the country’s expanding twin deficits balanced by higher bond yields. The last index stood at 90,341, not far from where the year started at 90,260.
The increase in Treasury yields helped the dollar gain slightly against the yen, to 105.42, as the Bank of Japan is actively restricting income at home.
The euro was stable at $ 1.2121, trapped between support at $ 1.2021 and resistance around $ 1.2169.
One commodity that is not doing so well is gold, partly because of rising bond yields and partly because investors question whether cryptocurrencies can be better protection against inflation.
The precious metal stood at $ 1,782 an ounce, having started the year at $ 1,896. rose 2.3% on Monday to $ 57,275, having started the year at $ 19,700.