SINGAPORE (Reuters) – Asian stocks rebounded from their two-week low on Tuesday, as higher commodity prices boosted market expectations for improved growth prospects, a day after rising bond yields the US Treasury and inflation outlook hit US tech stocks.
European Eurostoxx 50 futures and German DAX FDXc1 futures were both up 0.2%, while futures on London’s FTSE FFIc1 rose 0.3%. E-mini futures for the S&P 500 rose 0.5%.
The largest MSCI index of Asia-Pacific stocks outside of Japan rose 0.4% to 726.6 after falling to 719.8, the lowest level in two weeks. The indicator has eased from last week’s record high, but is still up around 9% so far this year.
Driven by the recovery in commodities, the Australian S & P / ASX 200 index rose nearly 0.9%. Singapore’s Straits Times index put in 0.6% and Taiwan rose 0.2%. Hong Kong grew 1%, while Kospi, the tech-laden South Korea, lost 0.3%.
Japanese markets were closed for a public holiday.
“We are in an unprecedented period, but it is likely that low interest rates will persist long after the global economy has shed the pandemic,” Keith Wade, chief strategist at Schroders said in a note.
“For financial markets, such a prospect will intensify the search for yield and undoubtedly create volatility and bubbles as investors seek returns in a ‘zero’ environment,” Wade added.
On Wall Street, high-growth stocks like Apple, Microsoft and Tesla weighed on the Nasdaq Composite, which lost 2.5% on Monday.
Commodity prices strengthened again on Tuesday. Oil prices rose on a tight global supply outlook after US production was hammered by freezing weather and an upcoming meeting of major crude producers is expected to keep production largely under control.
Analysts said the markets were inspired by the rise in commodity prices as the rise implied strong economic activity.
Brent rose 1.1% to $ 66.4, holding firmly near its one-year highs. Spot gold also hit a one-week high at $ 1,812.6 an ounce as inflation fears reinforced the bullion’s appeal as a hedge.
Strength in commodities kept the Australian dollar stable at $ 0.79 against the US dollar, just near a three-year high.
Bond yields rose sharply this month as prospects for another US fiscal stimulus raised hopes for a faster global economic recovery. However, it is also fueling inflation concerns, prompting investors to sell growth stocks which have rallied in recent months.
“US real interest rates are now in positive territory, which has raised concerns about the consequences for stock markets,” Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management said in a report.
The dollar index was flat at 90.026, with the euro up 0.1% to $ 1.2166. The Japanese yen rose slightly against the greenback to 105.09 per dollar.
Cash Treasuries were not traded in Asia with Tokyo closed for the holidays, but futures firmed slightly and showed an implied ten-year Treasury yield of 1.34%.
Markets will look to Federal Reserve Chairman Jerome Powell, who will give his semi-annual testimony on Tuesday. Powell is likely to reiterate his commitment to maintaining extremely easy politics for as long as it takes to push inflation up, analysts said.
“In addition to the ever-present question of what it might take for the Fed to consider a cut, the most pressing investor interest is when the Fed might react to level or volatility interest rates after recent hikes, ”Citi strategist said in a note.
Reporting by Anshuman Daga in Singapore; Editing by Ana Nicolaci da Costa and Gerry Doyle