Asian stocks climbed Tuesday following gains on Wall Street as immediate concerns over the strength of the global financial system dissipated.
(Bloomberg) — Asian stocks climbed Tuesday following gains on Wall Street as immediate concerns over the strength of the global financial system dissipated.
Futures for the S&P 500 and the Nasdaq 100 rose on news that US officials are studying ways to guarantee all bank deposits if the current financial crisis expands.
Meanwhile, shares opened higher in South Korea and Australia, while contracts for shares in Hong Kong pointed to solid gains. Finance stocks in Asia enjoyed some relief after days of turmoil, climbing around 0.5% on Tuesday.
The dollar held losses early Tuesday after a measure of the greenback’s strength dropped to the lowest in a month on Monday. That came as expectations grew that the Federal Reserve may adapt a more cautious policy approach when it decides on interest rates Wednesday.
Government bond yields were little changed in Australia and New Zealand after Treasuries whipsawed through the global trading day on Monday. The policy-sensitive two year Treasury yield ended Monday 14 basis points higher and just below 4%. There will be no trading of cash Treasuries in Asia hours Tuesday with a holiday in Japan.
Investors have increased bets on a quarter-point hike by the Fed as the recent financial turmoil has spurred speculation on a slower pace of tightening from major central banks worldwide.
Just a couple of weeks ago, investors were betting it would raise rates close to 6% and that the European Central Bank would hike past 4%. Now markets imply the tightening cycles are almost over and wager on multiple rate cuts in the US by year-end.
Swap traders currently see the Fed’s benchmark ending the year around 4% — a whole percentage point below the central bank’s rate estimate in the December “dot plot” that comes as part of the quarterly economic projections.
“Further rate hikes are no longer warranted, in our opinion”, Ed Yardeni, president of Yardeni Research Inc., wrote in a note. Fed Chair Jerome Powell will have to acknowledge that “the crisis confirms that interest rates are sufficiently restrictive and that financial conditions are rapidly getting tighter,” he said.
Morgan Stanley’s Michael Wilson said the stress in the banking system marks what’s likely to be the beginning of a painful and “vicious” end to the bear market in US stocks.
“This is exactly how bear markets end — an unforeseen catalyst that is obvious in hindsight forces market participants to acknowledge what has been right in front of them the entire time,” Wilson wrote.
Elsewhere, oil rose slightly after a turbulent session and gold was little changed.
Key events this week:
- US existing home sales, Tuesday
- US Treasury Secretary Janet Yellen to appear at Senate subcommittee hearing, Wednesday
- FOMC rate decision, news conference from Chair Jerome Powell, Wednesday
- EIA crude oil inventory report, Wednesday
- Eurozone consumer confidence, Thursday
- BOE interest rate decision, Thursday
- Swiss National Bank rate decision and press conference, Thursday
- US new home sales, initial jobless claims, Thursday
- US Treasury Secretary Janet Yellen testifies to a House Appropriations subcommittee, Thursday
- Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
- US durable goods, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.3% as of 9:27 a.m. Tokyo time. The S&P 500 rose 0.9% on Monday
- Nasdaq 100 futures rose 0.3%. The Nasdaq 100 rose 0.3%
- South Korea’s Kospi index rose 0.7%
- Australia’s S&P/ASX 200 Index rose 1.3%
- Hong Kong’s Hang Seng futures rose 1.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was unchanged at $1.0721
- The Japanese yen fell 0.2% to 131.53 per dollar
- The offshore yuan was little changed at 6.8744 per dollar
- The Australian dollar was little changed at $0.6717
Cryptocurrencies
- Bitcoin fell 0.6% to $27,919.82
- Ether fell 0.9% to $1,746.29
Bonds
- The yield on 10-year Treasuries advanced six basis points to 3.48%
- Australia’s 10-year yield declined one basis point to 3.23%
Commodities
- West Texas Intermediate crude rose 0.2% to $67.75 a barrel
- Spot gold fell 0.1% to $1,976.12 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth and Garfield Reynolds.
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