- MSCI Asia ex-Japan index up 1% as virus nervousness declines
- Dollar trails near year highs as ECB waited
- Oil hangs on to bounce back on firming demand hopes
SINGAPORE, July 22 (Reuters) – Asian stocks rallied on Thursday, bonds suffered losses and oil held onto large gains as investors seemed to put aside nervousness about the virus for now and waited for some European Central Bank assured that political support would continue for some time.
The largest MSCI Asia-Pacific stock index outside of Japan (.MIAPJ0000PUS) followed Wall Street higher and rose 1% with large gains from Sydney (.AXJO) to Seoul (.KS11) and Hong Kong (.HSI). Japanese markets are closed until Monday.
There has been no obvious catalyst for the recent inventory rebound, or the drop on Friday and Monday, although a study on Wednesday showed the Pfizer and AstraZeneca vaccines to be effective against the Delta coronavirus variant. Read more
“Every now and then, investors look for reasons to take a profit and that’s what we’ve seen,” said Jun Bei Liu, portfolio manager at Tribeca Investment Partners in Sydney.
“The market suddenly got worried about the delta variant and how it might affect the path to recovery,” she said. “But what we compared to 12 months ago are quite a few viable vaccines… eventually we’ll come out of them and we’re much closer to the end than 12 months ago.”
Yet unlike Wall Street, most Asian indexes have struggled to recoup losses from the start of the week as Asia faces burgeoning epidemics among unvaccinated populations and nerves persist around China’s regulatory crackdown on tech companies.
Shares of heavily indebted Chinese real estate developer Evergrande (3333.HK) rebounded around 11% in Hong Kong after it said it resolved legal disputes with a lender.
Elsewhere, the resilience of the US dollar – which traded near the recent multi-month peaks at the start of the Asian session – also suggests that forex markets are still fairly cautious.
The dollar index stood at 92.812, after a three-month high at 93.194 and the euro held just above recent lows at $ 1.1791.
“The dollar has traded center stage regardless of fluctuations in risk sentiment in recent days,” Westpac analysts said in a note, supported by the idea that high inflation could lead to higher prices. American rates.
A move to a more structurally accommodating European Central Bank should cement the dollar index at higher levels, analysts said, with a test of year highs likely this quarter.
ON LAGARDE WATCH
With a mostly stripped-down data schedule on Thursday, the European Central Bank’s policy-making decision, expected at 11:45 a.m. GMT, and President Christine Lagarde’s subsequent press conference are the main focus of the markets.
Lagarde instilled in traders a sense of anticipation after signaling an adjustment in the bank’s key rates to reflect a new, more flexible inflation targeting strategy. Read more
“To really bolster their credibility, the ECB could tie its rate path to an explicit calendar date – that is, no rate hike until the end of 2024,” said Luke Suddards, strategist at the House of Pepperstone brokerage. “It would be a conciliatory surprise for the forex markets and put pressure on the euro crosses.”
Rate markets slowed in Asia, with trade thinned by the Tokyo holiday, following an overnight Treasury bill selloff that left the benchmark U.S. government debt yield at 10 years at 1.2884%.
Investors have their eye on a partisan showdown in Washington over the U.S. debt ceiling, as the U.S. Treasury is expected to exhaust its borrowing power in October, which has put upward pressure on short-term rates in the U.S. overnight. Read more
In commodities markets, oil held on to most of Wednesday’s sharp price hike, its biggest single-day gain in three months. Brent crude futures fell 0.4% last to $ 71.94 a barrel, but gained more than 4% on Wednesday.
Gold was stable at $ 1,801 an ounce and cryptocurrencies were firm after rebounding from lows when Tesla boss Elon Musk said the automaker would likely resume accepting bitcoin payments after a due diligence on its energy consumption.
Reporting by Tom Westbrook; Editing by Ana Nicolaci da Costa
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