Asian equity rally keeps global race on track

HONG KONG (Reuters) – Asian stocks rallied on Tuesday, paving the way for global equities to extend their bull run for a 12th consecutive session, as investors banked on a coronavirus vaccine rollout to maintain the global economic recovery on the right track.

Oil prices soared to a 13-month high as a deep freeze due to a severe snowstorm in the United States not only boosted demand for electricity, but also threatened oil production in Texas.

The surge in Asian equities has paved the way for renewed optimism in global markets.

S & P500 futures were up 0.5% and the MSCI All Country World Index (ACWI), which has risen daily so far this month, edged up.

The largest MSCI index of Asia-Pacific stocks outside of Japan climbed 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 a 32-month high, while the Australian S & P / ASX200 gained 0.7% for the session. Mainland Chinese markets will remain closed during the holidays until Thursday.

The positive sentiment was also extended to Bitcoin which flirted with crossing the $ 50,000 barrier.

Bitcoin was trading at $ 49,323.56 in the afternoon Asian trading session, slightly below its all-time high of $ 49,715 reached on Sunday.

Alex Wolf, head of Asia investment strategy at JPMorgan Private Bank, said the ongoing deployment of the coronavirus vaccine gives investors confidence that global growth will be protected in 2021.

“It’s a positive factor that we are entering the process of economic normalization,” Wolf said.

Ord Minnett adviser John Milroy said that while stock markets were positive, investors were wary of future inflation risk due to stimulus programs by the central bank and the government in place around the world.

“There is a clear sentiment with rates remaining low for some time to come and investor appetite for stocks remaining strong, we will likely see the markets hold for quite some time,” Milroy told Reuters.

“The idea that inflation could rise much faster and sooner than the Fed currently thinks. Then if they raise rates to combat that, which happens to the stock markets and of course the bond markets. “

The bullish outlook on the economy pushed bond yields higher, with 10-year US Treasuries gaining 5 basis points to 1.24% in Asian trade, their highest since late March.

Investors are looking to the minutes of the US Federal Reserve’s January meeting, due for release on Wednesday, to confirm its commitment to maintain its accommodative policy for the near future. This in turn should keep an eye on bond yields.

But some analysts believe investors should keep a cautious eye on bond yields.

“If US bond yields continue to rise, it could start to destabilize stocks,” said Masahiro Ichikawa, chief strategist at Sumitomo Mitsui DS Asset Management.

Wolf said JPMorgan’s private bank predicted that 10-year yields in the United States could reach 1.5% by the end of 2021, as investors again bank on further economic stimulus that could improve global growth prospects.

“Increased yields are not of great concern to the rest of the world. It is the rate of increase that tends to matter the most from an Asian perspective. If there is a rapid price revision, it can have a negative effect on emerging markets, ”he said.

US President Joe Biden is continuing his plan to inject an additional $ 1.9 trillion in stimulus into the economy, to further boost market sentiment.

US crude futures were trading up 1.1% to $ 60.11 a barrel.