Stock rebound moderates in Asia; treasuries steady: markets wrap

A global rebound in stocks moderated in Asia on Wednesday amid uncertainty over the omicron virus strain’s economic impact and a foggy outlook for US fiscal stimulus.

A rally in technology shares bolstered Hong Kong, while markets in China and Japan were steady. US futures turned lower after the S&P 500 snapped three days of declines and the tech-heavy Nasdaq 100 climbed more than 2%. European contracts made modest gains.

Risk appetite revived on Tuesday, stoking a jump in commodities and eroding demand for havens. Crude oil and Treasury yields remained higher, while a dollar gauge was little changed.

A strong 20-year auction underscored wider, structural demand for US government bonds amid a savings glut and range of economic risks.

Thinner trading volumes heading into the Christmas holidays could exacerbate market swings, leaving strategists reluctant to read much into day-to-day gyrations during the period. Markets continue to be shadowed by escalating mobility curbs to fight omicron and a diminishing stimulus tailwind.

The global reopening narrative will in time gain traction again, Nicole Webb, Wealth Enhancement Group senior vice president, said on Bloomberg Television.

“While this variant is significant and the impact is powerful, I do still have my rose-colored glasses heading into the New Year because below the surface there is still a lot of opportunity” away from trades that are played out or frothy, Webb said.

Biden plan

Sentiment got a boost after President Joe Biden said he still has a chance to strike a deal with Senator Joe Manchin to get his roughly $2 trillion economic plan, Build Back Better, through Congress.

On the virus front, the US Food and Drug Administration is poised to authorise a pair of pills from Pfizer Inc. and Merck & Co. to treat Covid-19 as soon as this week, adding to the arsenal of coronavirus treatments.

Biden said omicron will result in more infections among vaccinated Americans but that they are very unlikely to be severely ill.

‘Strong footing’

“We’ve got a wave of Covid, but the undertow at least with each successive wave seems to be weaker,” Rod von Lipsey, managing director at UBS Private Wealth Management, said on Bloomberg Television. “We’re on a very, very strong footing financially and economically speaking. So we think that the markets and investors will be able to withstand that.”

Singapore will freeze new ticket sales for flights and buses under its vaccinated travel lanes program as the city-state looks to stem the import of omicron. Australian Prime Minister Scott Morrison urged the country’s state and territory leaders to move ahead with reopening plans.

“Whipsaw price action continues ahead of the holiday season,” Craig Erlam, senior market analyst at Oanda, wrote in a note, adding that “these are illiquid markets and omicron continues to be a huge cloud of uncertainty over them.”

What to watch this week:

• EIA crude oil inventory report Wednesday
• Bank of Japan Governor Haruhiko Kuroda speaks Thursday
• US consumer income, new home sales, U.S. durable goods, University of Michigan consumer sentiment, initial jobless claims. Thursday
• Friday: US markets are closed. European markets close earlier

Some of the main moves in markets:

Stocks

• S&P 500 futures dipped 0.1% as of 1:07 p.m. in Tokyo. The S&P 500 rose 1.8%
• Nasdaq 100 futures fell 0.3%. The Nasdaq 100 rose 2.3%
• Japan’s Topix index rose 0.2%
• Australia’s S&P/ASX 200 Index was little changed
• South Korea’s Kospi index rose 0.2%
• Hong Kong’s Hang Seng Index gained 0.3%
• China’s Shanghai Composite Index was steady
• Euro Stoxx 50 futures rose 0.4%

Currencies

• The Japanese yen was at 114.10 per dollar
• The offshore yuan traded at 6.3798 per dollar
• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1273

Bonds

• The yield on 10-year Treasuries was at 1.46%
• Australia’s 10-year bond yield was at 1.60%

Commodities

• West Texas Intermediate crude rose 0.4% to $71.39 a barrel
• Gold was steady at $1 790.34 an ounce