Asian stocks are being tracked. Wall Street rises as US yields level off

On Thursday, Asian equities rose in tandem with Wall Street, but U.S. Treasury yields remained stable and the dollar fell, as recent U.S. data increased confidence that inflation is nearing a peak, despite the fact that several major central banks hiked rates rapidly. Traders were anticipating a European Central Bank meeting later in the day to see if it would be as hawkish as others had been.
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 0.4 percent in early Asian trade, boosted by a 0.5 percent rise in resource-heavy shares in Australia and a 0.6 percent rise in blue chip stocks in mainland China. The Nikkei 225 index in Japan was up 1.2 percent.

On Thursday, South Korean stocks were an anomaly. The KOSPI index (.KS200) declined 0.4 percent after the central bank unexpectedly hiked its policy rate to the highest since August 2019 in an effort to cool rising inflation. On Friday, Asian markets such as Hong Kong, Singapore, and Australia will be closed for Easter, as will major European and American markets.

“I believe there have been a few of recent favorable events that may be supporting Asian stocks today. First, core consumer prices in the United States have moderated… suggesting that inflationary pressures in the United States may begin to ease soon, and second, Chinese policymakers have recently made more encouraging remarks about stabilizing and supporting economic growth “INVESCO’s global market strategist, David Chao, is based in Hong Kong.

“I’ve maintained that an increase in money supply and credit growth might create a floor for Chinese shares and imply that investor confidence may soon begin to recover, particularly if COVID and geopolitical concerns fade.” On Wednesday, China’s cabinet signalled imminent reductions in banks’ reserve requirement ratios (RRR) to help an economy hammered by COVID-19 lockdowns.
Yields on US Treasuries were stable in early Asian trade. The yield on 10-year Treasury notes was 2.7120 percent, down from a three-year high of 2.836 percent before U.S. data released on Tuesday indicated inflation was lower than investors had expected. The two-year yield was 2.3727 percent, up from a finish of 2.3645 percent the day before.

On Thursday, falling US rates provided some comfort to the battered yen, which had dropped above the 126 yen per dollar barrier the previous session. The potential of rapid and aggressive interest rate rises in the United States, as well as rising market views that the Bank of Japan will maintain rates ultra-low in the short future, has depreciated the yen.

The euro gained 0.2 percent versus the dollar, although it was still close to its one-month low due to fears over Ukraine. The hawkishness of central banks has hurt equity markets, but Wall Street recovered to close significantly higher on Wednesday, fueled by resurgence in interest-sensitive growth sectors.

Investors in US equities appear to have starting to buy into “the assumption that inflation is peaking” and are displaying confidence that all of the bad news has already been priced in, according to Hebe Chen, market analyst at IG, in a note on Thursday.

The Bank of New Zealand hiked interest rates by 50 basis points on Wednesday, the largest single move in more than two decades, while the Bank of Canada also lifted rates by 50 basis points on Wednesday, making its greatest single rise in more than two decades and signaling more hikes to come.

Geopolitical worries might dampen market confidence once more. Ukraine warned on Wednesday that Russia was stepping up its attempts in the south and east to seize complete control of Mariupol, while Western nations expressed concern. Oil prices were marginally down on Thursday morning, following a big rise in the first part of the week, as traders evaluated a larger-than-expected build in US oil reserves against tighter global supply. Crude oil in the United States fell 0.64 percent to $103.58 a barrel. Brent crude has dropped to $108.25 per barrel. Gold was down marginally. The spot price of gold was $1975.21 per ounce.