HONG KONG (Reuters) – Asian equities rallied on Tuesday, setting the stage for world equities to extend their bull run to a 12th session in a row as investors knocked out a rollout of coronavirus vaccines to keep the global economic recovery on track.
Oil prices jumped to a 13-month high as a deep freeze due to a severe snowstorm in the US that not only increased demand for power but also threatened oil production in Texas.
Asia’s rising equities paved the way for renewed optimism in global markets.
S & P500 futures rose 0.5% and MSCI’s all country world index (ACWI), which has risen every day so far this month, rose slightly.
MSCI’s broadest index of stocks in Asia-Pacific outside Japan rose 0.62%, while Japan’s Nikkei rose 1.4% to a 30-year high.
In Hong Kong, the Hang Seng Index rose 1.4% to peak at 32 months, while Australia’s S & P / ASX200 rose 0.7% for the session. The Chinese markets on the mainland remain closed during the holidays until Thursday.
The positive sentiment was also extended to Bitcoin, which flirted with breaking through the $ 50,000 barrier.
Bitcoin traded at $ 49,323.56 in the Asian afternoon trading session, just below its record high of $ 49,715 hit on Sunday.
JPMorgan Private Bank’s head of Asia’s investment strategy Alex Wolf said the ongoing rollout of the coronavirus vaccine gave investors confidence that global growth would be protected by 2021.
“This is a positive factor in getting us into the economic normalization process,” Wolf said.
Word Minnett adviser John Milroy said that while stock markets were positive, investors became aware of future inflation risk due to central bank and government stimulus programs around the world.
“There is a clear sense of interest rates remaining low for some time yet, and investors’ appetite for equities to remain strong, we are likely to see markets hold up for some time to come,” Milroy told Reuters.
“Getting traction is the idea that inflation can rise much faster and faster than the Fed is currently thinking. So if they raise interest rates to fight it, what happens to the stock markets and of course the bond markets. ”
The bullish view of the economy raised bond yields, with 10-year US government bonds rising 5 basis points to 1.24% in Asian trading, the highest since the end of March.
Investors are looking at the minutes of the US Federal Reserve’s January meeting, published on Wednesday, to confirm that they are committed to maintaining its deaf policy stance in the near future. It is again set to keep track of bond yields.
But some analysts say investors should keep an eye on bond yields.
“If US bond yields continue to rise, it may start to disrupt equities,” said Masahiro Ichikawa, chief strategist at Sumitomo Mitsui DS Asset Management.
Wolf said JPMorgan’s private bank predicted US 10-year interest rates could reach 1.5% by the end of 2021, as investors again tapped into additional economic stimulus that could help global growth prospects.
“An increase in yields is not a major concern for the rest of the world. It is the pace of the rise that matters most from an Asian perspective. If there is a rapid re-pricing, it can have a negative effect on new markets, ”he said.
US President Joe Biden is pushing ahead with his plan to pump an extra $ 1.9 trillion in stimulus into the economy in a further boost to market sentiment.
US crude futures traded 1.1% at $ 60.11 per share. Barrel.
Further reporting by Tomo Uetake in Sydney; Editing Shri Navaratnam and Richard Pullin
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