Bloomberg (March 30): Asia stocks are set to open firmer after U.S. equities bounced off session lows, with rapid progress in the U.S. vaccine rollout overshadowing the risk of further fallout from recent block sales.
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Futures pointed up in Japan, Australia and Hong Kong. S&P 500 Index futures opened higher in Asia after President Joe Biden’s announcement that 90% of adults will be eligible for the Covid-19 vaccine next month, and the Dow Jones Industrial Average closed at another all-time peak. Financials dragged the S&P 500 slightly lower on the day, amid revelations that some major banks liquidated holdings in Bill Hwang’s Archegos Capital Management after he failed to meet margin calls.
The dollar gained, as did Treasury yields, taking the 10-year benchmark back above 1.70%.
Investors have been focusing on the strength of the recovery and inflation risks as governments step up spending to spur growth. Later this week, the U.S. president plans to unveil a further stimulus program with a tilt toward infrastructure. Positive news on vaccines is helping risk appetite, with a real-world study from Pfizer Inc. and Moderna Inc. showing their doses effectively prevented coronavirus infections, U.S. government researchers said.
“The ongoing smooth vaccination in the U.S. and extensive fiscal support is lifting the growth outlook, and with it, inflation expectations,” said Esty Dwek, head of global market strategy at Natixis Investment Managers. The rise in yields “has not led to flows out of equities. With strong earnings growth expectations for this year and next, with abundant liquidity and ongoing fiscal easing and an acceleration in vaccinations, the fundamental support for risk assets is in place,” she said.
Broader markets have seen only small ripples from the forced unwind of Archegos positions so far. The investment-grade credit default swaps index, a gauge of U.S. bond market fear, was relatively calm. Traders are demanding a higher cost to hedge against losses on the debt of banks that have been caught up in the Archegos situation, however, including Nomura Holdings Inc. and Credit Suisse Group AG.
Oil climbed to the highest in almost two weeks as traders looked to this week’s OPEC+ meeting, with speculation that renewed demand concerns will push the group to keep production in check. Meanwhile, the Suez Canal reopened to traffic after the container ship blocking it was tugged free.
Some key events to watch this week:
President Biden is expected to unveil his infrastructure program Wednesday.
EIA crude inventory report Wednesday.
OPEC+ meets to discuss production levels for May on Thursday.
China Caixin PMI due Thursday.
U.S. employment report for March on Friday.
Good Friday starts the Easter weekend in countries including the U.S., U.K., France, Germany, Australia and Canada.
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Stocks
S&P 500 futures rose 0.2% as of 7:30 a.m. in Tokyo. The S&P 500 Index declined 0.1%.
Nikkei 225 futures rose 0.9%.
Australia’s S&P/ASX 200 Index futures rose 0.7%.
Hong Kong’s Hang Seng Index futures rose 0.3%.
Currencies
The yen traded at 109.80 per dollar, around the weakest in a year.
The offshore yuan was at 6.5754 per dollar after falling 0.5%.
The Bloomberg Dollar Spot Index climbed 0.2%.
The euro was at US$1.1770.
Bonds
The yield on 10-year Treasuries increased four basis points to 1.71%.
Australia’s 10-year bond yield rose six basis points to 1.75%.
Commodities
West Texas Intermediate crude edged up 0.5% to US$61.84 a barrel.
Gold was at US$1,712.84 an ounce.-The Edge Market-Bloomberg