Asian equities rise as US bond yields reach low end 2017

TOKYO (Reuters) – Asian stocks advanced on Tuesday after two days of losses as 10-year US Treasury yields rose slightly, but the outlook remained uncertain as investors weighed the likelihood of the US economy entering in recession or recession.

PHOTO FILE: A man is seen in front of an electronic board showing the stock market information on the first trading day of the year of the pig, following the Chinese Lunar New Year holiday, in a brokerage house in Hangzhou, in Zhejiang Province, China, February 11, 2019. REUTERS / Stringer

European and US equity markets should follow the example of Asia, have revealed optimists, with futures on the London FTSE up 0.3% and E-minis for the S & P 500 with a third of a percentage.

The broadest index of MSCI Asia Pacific ex-Japan shares rebounded 0.2% after losing 1.4% in the previous session.

Australian stocks stagnated, while Japan's Nikkei jumped 2.1% after posting its biggest drop since Monday at the end of December.

China's first-rate CSI300 reversed the trend, dropping its initial gains to 0.7%, while Hong Kong's Hang Seng was down slightly.

Wall Street shares changed little on Monday, the S & P 500 ended with a slight loss of 0.08%.[.N]

Investors were frightened by sharp declines in US bond yields and the reversal of the US Treasury yield curve, widely viewed as an indicator of economic recession.

The 10-year US Treasury yield edged up to 2.442% after losing 5 basis points on Monday.

It has fallen about 17.5 basis points since the US Federal Reserve last week canceled its rate hike forecast and announced the end of the downgrade, citing signs of economic slowdown.

"The US yield curve continues to reverse," said Michael Every, senior strategist for the Hong Kong-based Asia-Pacific Rabobank.

"This is not a positive sign, as bond market watchers should know and obsessed stock markets should learn quickly," he said in a note. "How long will it go before the markets start doing the same?"

The 10-year yield fell below the three-month yield on Friday for the first time since 2007, reversing the yield curve.

Researchers at the San Francisco Fed said the difference between these two deadlines was the most useful for predicting a recession.

"I think the market reacted excessively to the inversion of the yield curve because the San Francisco Fed said it was the most indicator reliable, "said Hiroshi Nakamura, senior director of investment planning at Mitsui Life.

"I'm waiting for a correction of the last bond bounce. For now, we have to see this week's auction, "he said.


The Treasury Department will sell vouchers with $ 113 billion coupons this week, including $ 40 billion in two-year bonds on Tuesday, $ 41 billion in five-year bonds on Wednesday and $ 32 billion in bonds. seven years Thursday.

Investors will also follow the decision makers of the Fed to speak on Tuesday.

US economic growth could be "pretty weak" in the first quarter, but should be closer to 2 to 2.5% for the rest of the year, but a pause on the part of the central bank is a responsible thing to do, says Eric, president and CEO of the Fed Bank of Boston. Rosengren said at a conference in Hong Kong.

Federal funds rate futures now fully account for a rate cut later this year, with about a 80% chance that such a move will be integrated by September.

In the foreign exchange market, the fall in US yields has compromised the dollar's attractiveness for returns.

The euro amounted to $ 1.1305, after rising slightly on Monday after the German Institute IFO said its business climate index was 99.6, exceeding the consensus forecast of 98.5 and ending six months of decline.

The dollar was slightly higher at 110.14 yen, after reaching its lowest level in a month and a half to 109.70 Monday.

"While the dollar / yen has not fallen much and things are not in panic, a sense of caution has been exercised," said Shusuke Yamada, chief strategist of the currency and Japanese stocks at Bank Of America Merrill Lynch.

The pound sterling was worth $ 1.3180, wiping out small gains after legislators voted for Prime Minister Theresa May's government to take control of the Brexit process for a day.

May said on Monday that there was still not enough support to submit his Brexit agreement to a third vote in parliament.

Oil prices were at the bottom of the four-month highs as the prospect of a tightening of US crude oil supply was offset by fears of slowing global economic growth.

US crude futures traded at $ 59.26 a barrel, up three-quarters of a percent that day, just shy of Thursday's $ 60.39 high, its highest level since mid-November.

Brent futures increased 0.2% to $ 67.37.

Gold fell by one-third of a percent to $ 1,317.60, but not far from a peak of nearly 1 month of $ 1,324.60 dollars staggered when the previous session.

Report by Hideyuki Sano and Daniel Leussink; Edited by Darren Schuettler & Kim Coghill

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