Asian stocks rebounded on Monday as a semblance of calm returned to global bond markets after last week’s mad rush, and progress on the U.S. COVID-19 stimulus package has supported optimism about the economy global.
While China’s official manufacturing PMI over the weekend missed forecasts and rose in February at its slowest pace in nine months, Japanese figures showed the fastest growth in two years. Investors are also counting on bullish news from a series of US data due this week, including the February payroll report.
Markets were also encouraged by new shipments of the newly approved Johnson & Johnson COVID-19 vaccine which is expected to begin in the United States on Tuesday.
The largest MSCI index of Asia-Pacific stocks outside of Japan edged up 0.8%, after losing 3.7% last Friday.
Japan’s Nikkei gained 2.1%, while Chinese blue chips added 0.5%.
NASDAQ futures rebounded 1.2% and S&P 500 futures rebounded 0.9%. EUROSTOXX 50 futures and FTSE futures both rose 1.1%.
Yields on US 10-year notes fell to 1.41%, following last week’s high of 1.61%, although they still ended last week 11 basis points higher and rose by 50 basis points over the year so far.
‘A break for the air’
Global bonds stabilized after central banks from Asia to Europe gave assurances that political support remains in place. This helped push Treasury yields back to their highest level in a year and put a floor below stocks. Investors have become concerned about the prospect of faster inflation leading to higher interest rates, with traders positioning themselves for the Federal Reserve to start tightening rates as early as next year.
“The market is testing the Fed and global central banks for their seriousness here,” Al Lord, managing director of Lexerd Capital Management, told Bloomberg TV. “There are growth expectations and growing concerns about inflation, and it is playing out in the markets.”
Rodrigo Catril, senior strategist at NAB, added: “The bonding move on Friday still feels like a hiatus for the air, rather than the catalyst for a move toward calmer waters.”
BofA analysts noted that the bond bear market is now one of the most severe on record with the annualized 10-year US government bond price return down 29% since last August, with Australia by 19%, the United Kingdom by 16% and Canada by 10%. .
The rout owes a lot to expectations of faster growth in the United States, as the House passed President Joe Biden’s $ 1.9 trillion coronavirus relief package, sending it to the Senate.
BofA U.S. economist Michelle Meyer has raised her forecast for economic growth to 6.5% this year and 5% next, due to the likelihood of a bigger stimulus package, better news on the virus front and encouraging data.
Cases of the virus have also declined by 72% since the peak on Jan.12, with the number of hospital admissions following closely behind, BofA added.
The rise in US yields combined with the general transition to safety helped the dollar index rebound to 90.917 from a seven week low at 89.677.
On Monday, the euro was flat at $ 1.2086, from last week’s high of $ 1.2242, while the dollar held near a six-month high against the yen at 106.57.
“Riskier” currencies and those exposed to commodities rebounded somewhat after taking a beating late last week, with Australian and Canadian dollars rising and emerging markets from Brazil to Turkey appearing more stable.
Unproductive gold was still fueling losses after hitting an eight-month low on Friday en route to its worst month since November 2016. It was last at $ 1,743 an ounce, just above a low of approximately $ 1,716.
Oil prices extended their gains ahead of an OPEC meeting this week where supply could be increased. Brent gained 4.8% last week and WTI 3.8%, while both were about 20% higher in February as a whole.
Brent was last up $ 1.27 to $ 65.69, while US crude rose $ 1.22 to $ 62.72 per barrel.