Asian equities advanced on Tuesday, putting world equities on track to extend their bull run to a 12th session in a row as optimism about the global economic recovery and expectations of continued low interest rates drive investment into more risky assets.
Oil prices rose to a 13-month high like 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.
MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 0.45 percent, while Japan’s Nikkei rose 0.4 percent to a 30-year high.
In Hong Kong, the Hang Seng index rose 1.79 percent to reach its 32-month high in its first trading session since Thursday after the lunar New Year holiday.
The mainland Chinese markets will remain closed during the holidays until Thursday, while Wall Street was also closed on Monday.
John Milroy, an adviser to Australian investment firm Ord Minnett, said that while stock markets are rising, investors are wary 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 news agency.
“Getting traction is the idea that inflation can rise much faster and faster than [US Federal Reserve] thinking at the moment. 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 gaining five basis points to 1.245 percent in early Asian trading, the highest since the end of March 2020.
Investors are looking forward to the release Wednesday of the minutes of the Federal Reserve meeting in January to confirm that they are committed to maintaining its deaf policy stance in the near future. This, in turn, may continue to push bond yields higher as investors avoid fixed-rate assets in favor of more risky ones, such as equities.
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.
Stock index futures for the US S & P500 traded 0.65 percent higher at a record high, and the MSCI World Index (ACWI), which has risen every single day so far this month, also ticked up a bit.
The successful implementation of COVID-19 vaccines in many countries is creating hope for further recovery in economic activities hampered by the range of antivirus inhibitors.
US President Joe Biden is pushing ahead with his plan to pump an additional $ 1.9 trillion in stimulus measures into the economy in a further boost to market sentiment.
Oil prices are rising
Oil prices rose to their highest level in about 13 months as a US winter storm raised hopes of a further recovery in demand.
U.S. oil production has fallen by anywhere from 1.5 million to 1.7 million barrels a day, helping U.S. crude prices trade above $ 60 a barrel for the first time in more than a year. The region’s refining complex – which produces almost half of US fuel – is struggling to collapse without electricity. Some of the largest oil refineries are completely closed and threaten to reduce the supply of petrol and diesel across the country.
Prices have risen in recent weeks due to a tightening of supplies, mainly due to cuts in production by the Organization of the Petroleum Exporting Countries (OPEC) and its allied producers.
Rising oil prices supported commodity-denominated currencies such as the Canadian dollar, while secure port currencies including the US dollar took the back seat.
The British pound held at $ 1.3910 and remained at its highest level since April 2018.
Offshore Chinese yuan hit a two-and-a-half-year high of $ 6.4010 per night and last stood at 6.4030.
MSCI’s currency index for new markets also hit record highs.
The Japanese yen weakened to 105.36 per share. US dollar and rose closer to the four-month low of 105.765 set on February 5, while the euro rose 0.1 percent to $ 1.2142.
In Asia, Bitcoin traded at $ 48,088.28, which was a record high of $ 49,715 hit on Sunday.
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