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© Reuters. FILE PHOTO: A man wearing a face shield walks past a screen displaying a graph showing the recent average from Nikkei outside a brokerage house, amid the coronavirus (COVID-19) outbreak , in Tokyo
By Wayne Cole
SYDNEY (Reuters) – Asian stock markets edged up on Monday as expectations of faster global economic growth and inflation hit bonds and boost commodities, even as rising yields real also makes stock valuations more strained in comparison.
The MSCI’s largest Asia-Pacific stock index outside of Japan added 0.1%, after slackening from a record high late last week as bond yields rise Americans confused investors.
recovered 1.0% and South Korea 0.4%, while the E-Mini futures contracts were a firmer fraction.
Bonds have been shattered by the prospect of a stronger economic recovery and even bigger borrowing as President Joe Biden’s $ 1.9 trillion stimulus package progresses.
“Yield curves have continued to steepen, as COVID infection rates continue to decline, plans to reopen are discussed and a broad US fiscal stimulus package looks likely,” Christian Keller said, Barclays (LON 🙂 ‘head of economic research.
“This in principle indicates better medium-term growth prospects for the United States and beyond, as other core yield curves move in the same direction,” he added. “Meanwhile, central banks appear poised to look through rising inflation this year, keeping the front-end of the curves anchored.”
Federal Reserve Chairman Jerome Powell is giving his biannual testimony to Congress this week and will likely reaffirm his commitment to maintaining extremely easy politics for as long as it takes to push inflation up.
European Central Bank President Christine Lagarde is also expected to appear conciliatory in a speech later Monday.
Yields on have already reached 1.36%, breaking the psychological level of 1.30% and taking the rise for the year so far to 41 basis points.
BofA analysts noted that 30-year bonds had returned -9.4% year-to-date, the worst start since 2013.
“Real assets far outweigh financial assets in 21, as cyclical, political and secular trends point to higher inflation,” the analysts said in a note. “Raw materials in full swing, energy laggards in vogue, materials in secular escape.”
COPPER RECOVERY
One of the stars has been, a key part of renewable technology, which climbed 7.7% last week to a nine-year high. Even the larger LMEX base metals index climbed 5.5% on the week.
Oil prices followed the race, helped by tight supplies and freezing weather, giving Brent gains of 21% for the year so far. [O/R]
Early Monday, futures rose 43 cents to $ 63.34 a barrel, while adding 11 cents to $ 59.35,
This has all been a boon for commodity-linked currencies, with the Canadian, Australian and New Zealand dollars all markedly higher for the year so far.
Sterling also hit a three-year high above $ 1.4,000, thanks to one of the fastest vaccine deployments in the world. British Prime Minister Boris Johnson is to sketch a path from COVID-19 lockdowns on Monday.
The has been relatively limited, with downward pressure from the country’s growing double deficit offset by higher bond yields. The index was the last at 90.341, not far from where it started the year at 90.260.
The rise in Treasury bill yields helped the dollar gain somewhat against the yen at 105.42, as the Bank of Japan actively restricts yields domestically.
The euro was flat at $ 1.2121, stuck between support at $ 1.2021 and resistance around $ 1.2169.
Gold is a commodity that is not doing so well, partly because of rising bond yields and partly because investors are wondering if cryptocurrencies could be a better hedge against inflation.
The precious metal stood at $ 1,782 an ounce, having started the year at $ 1,896. was up 2.3% Monday to $ 57,275, after starting the year at $ 19,700.
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