Asian stocks on the verge of first monthly loss since October bond rout

SYDNEY (Reuters) – Asian stocks were on track for their first monthly loss since last October, although markets rose on Wednesday and the US dollar held firm as investors focused on growing signs of a secure global economic recovery.

The largest MSCI index for Asia-Pacific stocks outside of Japan climbed for a fourth consecutive day to a one-week high of 682.36 points. The index, which rose 0.4%, was still a good distance from an all-time high of 745.89 hit last month.

For the month so far, the index is down 1.6% to be on track for its first loss in five months. It is also on the cusp of its smallest quarterly gain since a 21% drop in March 2020 when the coronavirus pandemic brought the world to a standstill.

As many countries rolled out the coronavirus vaccine, investors banked on a faster-than-expected economic recovery by abandoning safe-haven bonds, triggering a sudden and massive rise in yields which in turn spooked equity investors.

Tech stocks were the recipients of the so-called “term premium crisis” because they were seen as vulnerable to rising interest rates.

Blackrock analysts said the view was “too simplistic,” adding that they still liked tech stocks.

Wall Street ended lower overnight as higher yields weighed on tech stocks, but financial stocks rose, helped by signs that the fallout from the Archegos collapse would be largely contained.

“Technology is a diverse industry and the driver of higher returns matters more than the hike itself,” Blackrock said in a note to clients.

“Our new nominal theme implies that central banks will be slower to raise rates to curb inflation than in the past, supporting our pro-risk stance and preference for technology.”

Over a 6 to 12 month period, Blackrock is overweight equities in the United States, emerging markets, Asia excluding Japan and the United Kingdom. It is “underweight” in US Treasuries, forecasting a nominal increase in yields.

“The ‘term premium’ crisis primarily reflects investors demanding higher compensation for the now greater risks to portfolios presented by government bonds and inflation, in our view,” Blackrock said.

“This makes stocks even more attractive than bonds in a multi-asset context – and suggests that any further sell-off in the tech sector could present opportunities.”

Sentiment in Asia was improved thanks to data showing that Chinese factory activity grew at a faster rate than expected in March, while the country’s service sector also increased.

Despite the strong data, however, Chinese stocks started in the red with a blue chip index at 0.5%.

Japan’s Nikkei slipped 0.4% as the country’s industrial production fell in February on lower production of cars and electric machinery.

Australia’s benchmark index jumped 1.7%, New Zealand rose 0.3% while South Korea’s KOSPI index rose 0.75%.

E-mini futures for the S&P 500 rose 0.15% at the start of Asian trading.

There was some nervousness over the sour betting news at New York-based Archegos Capital Management, which had left the global banks that were funding its transactions with at least $ 6 billion in losses.

In forex markets, currencies were mainly a sea of ​​red against the US dollar which hit a year-long high of 110.48 against the yen, with investors betting massive fiscal stimulus and aggressive vaccinations will boost. the US economic recovery. [FRX/]

The dollar is on track for a third consecutive monthly rise against the yen and its strongest since late 2016.

The dollar index held steady above 93 after hitting a high of 93.357 on Tuesday. It went from nearly 90 in early March, on track for its best month since 2016.

The Australian dollar edged up to $ 0.7610, consolidating after falling to $ 0.7564 last week, the lowest level seen this year.

In commodities, Brent rose 33 cents, or 0.5%, to $ 64.47 a barrel while US crude added 12 cents to $ 60.68 a barrel.

Gold prices slipped a bit to 1,682.15 an ounce.