Asian stocks will get a reprieve as yields fall: Markets end

(Bloomberg) – Stocks in Asia are set to open higher on Wednesday after gains in U.S. equities and falling bond yields gave some breathing room to investors who fear higher rates could slow growth.

Futures contracts rose in Japan, Australia and Hong Kong. The S&P 500 erased last week’s losses with back-to-back gains. The tech-heavy Nasdaq 100 advanced with megacaps Apple Inc. and Microsoft Corp. offsetting declines in e-commerce giant Amazon.com Inc.

The long end of the Treasury curve led a rally, pushing 10-year yields below the 3% level and flattening the curve. Shorter maturities fell behind, weighed down by weak demand at an auction. A dollar gauge plunged.

Chinese stocks traded in the United States rose for a second day on heightened speculation that a year-long government crackdown on the tech industry is easing.

Markets continue to be skewed as sentiment remains fragile as investors fear interest rates will need to go much higher to contain inflation and stifle growth. Traders look to the US consumer price reading for May next Friday to discern the Federal Reserve’s rate trajectory and whether it will continue to rise in 50 basis point increments.

“Determining the direction over the next couple of months is getting harder and harder,” Kate Moore, head of thematic strategy for global allocation at BlackRock Inc., told Bloomberg Television. “There seems to be a lack of strong conviction in the direction of the market across all investment segments. We’re going to see a lot more investors sitting on the sidelines, staying cautiously positioned.

The World Bank has further cut its forecast for global economic expansion in 2022, warning that several years of above-average inflation and below-average growth lie ahead.

On Thursday, the European Central Bank is expected to end billions of euros in asset purchases and cement the path to an exit from eight years of negative interest rates.

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Key events to watch this week:

  • Reserve Bank of India rate decision on Wednesday
  • OECD Economic Outlook, a bi-annual analysis of key global economic trends and prospects for the next two years. Wednesday
  • European Central Bank rate decision, briefing by Christine Lagarde, Thursday
  • China trade, new yuan loans, money supply, global financing. Thursday
  • US CPI, University of Michigan Consumer Sentiment Friday
  • China CPI, Friday PPI

Some of the major movements in the markets:

Shares

  • The S&P 500 rose 1%
  • The Nasdaq 100 rose 0.9%
  • Nikkei 225 futures rose 0.5%
  • Australian S&P/ASX 200 index futures gained 0.7%
  • Hang Seng index futures rose 1.2%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The Japanese yen was at 132.63 to the dollar
  • The offshore yuan was at 6.6710 to the dollar
  • The euro was trading at $1.0707

Obligations

  • The yield on 10-year Treasury bills fell seven basis points to 2.97%

Goods

  • West Texas Intermediate crude rose 0.8% to $119.41 a barrel
  • Gold rose 0.6% to $1,852.37 an ounce

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