Asian equities rise in US slipstream; dollar slips: markets wrap

Asian shares climbed Tuesday in the wake of tech-stock fueled gains on Wall Street and bets for less-aggressive interest rate hikes from the Federal Reserve.

The dollar ticker lower and Treasuries held recent declines, reflecting wanning demand for haven assets. Australian and New Zealand bonds fell, as did Japan’s benchmark 10-year debt.

Australian stocks advanced about 0.5% and Japan’s Topix index rallied as much as 1.5% while many other markets in the region remained closed for Lunar New Year celebrations. New Zealand equities ended marginally lower as investors assess the country’s incoming prime minister Chris Hipkins, who has pledged to prioritize the economy.

The upbeat tone for riskier assets was carried over from the US on Monday, when the tech-heavy Nasdaq 100 had its best two-day rally since November and the S&P 500 extended its surge to 12% from an October low.

A gauge of greenback strength was lower while remaining in the middle of its range from the past week. It’s biggest decline versus Group-of-10 currencies was against the yen.

With key centers including Hong Kong, Shanghai, Singapore and Seoul closed, much of the focus among global investors Tuesday is on central banks and US corporate earnings. Marquee names like Microsoft Corp. and Intel Corp. report results this week that will help shape the outlook for the technology sector.

“At some point the benefits of inflation on the revenue side get outweighed by the cost of inflation and the estimates and earnings come down,” said Michael Cuggino, chairman of Pacific Heights Asset Management, in an interview with Bloomberg Radio. “There is going to be more pressure on earnings and revenues and I do think an economic slowdown is real at some level.”

Markets have priced in a smaller 25-basis-point hike at the Fed’s Jan. 31-Feb. 1 meeting. Even as several officials say rates must peak above 5% and stay higher for longer, traders remain skeptical.

Meantime, Treasury Secretary Janet Yellen said she’s encouraged by progress on inflation, with energy prices and supply-chain issues easing across the globe even as the US labour market remains strong.

Elsewhere in markets, oil steadied as traders waited for fresh signals on the state of Chinese crude demand after the nation ditched Covid curbs. Gold held a small gain.

Key events this week:

• PMIs for US, euro area, UK, Tuesday
• Richmond Fed Manufacturing, Tuesday
• ECB President Christine Lagarde delivers a video message on “the euro as a guarantee of resilience,” Tuesday
• US MBA mortgage applications, Philadelphia Fed non-manufacturing activity, Wednesday
• US fourth-quarter GDP, new home sales, initial jobless claims, Thursday
• US personal income/spending, PCE deflator, University of Michigan consumer sentiment, pending home sales, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 1:25 p.m. Tokyo time. The S&P 500 rose 1.2% on Monday
• Nasdaq 100 futures were little changed. The Nasdaq 100 rose 2.2%
• Australia’s S&P/ASX 200 rose 0.5%
• Japan’s Topix rose 1.4%

Currencies

• Bloomberg Dollar Spot Index fell 0.1% to 1,223.97
• The euro was little changed at $1.0879
• The Japanese yen rose 0.2% to 130.40 per dollar
• The offshore yuan was little changed at 6.7721 per dollar
• The Australian dollar rose 0.2% to $0.7040

Cryptocurrencies

• Bitcoin rose 0.6% to $23,124.05
• Ether rose 0.5% to $1,640.23

Bonds

• The yield on 10-year Treasuries was little changed at 3.51%
• Japan’s 10-year yield rose two basis points to 0.395%
• Australia’s 10-year yield advanced two basis points to 3.47%

Commodities

• West Texas Intermediate crude rose 0.2% to $81.75 a barrel
• Spot gold rose 0.2% to $1 934.85 an ounce