Asian equities opened higher Tuesday after US financial shares rose and Treasuries fell as fears of broader contagion from the banking turmoil eased.
(Bloomberg) — Asian equities opened higher Tuesday after US financial shares rose and Treasuries fell as fears of broader contagion from the banking turmoil eased.
Shares rose in Japan, with the Topix index headed for the highest in more than two weeks. Australian stocks also advanced and futures pointed to gains for the benchmark in Hong Kong.
Financial firms led the way on Wall Street on Monday, while energy producers also gained. The tech-heavy Nasdaq 100 ended the session 0.7% lower, capping a two-week advance.
The two-year Treasury yield slipped back below the 4% level at the open in Asia after surging 23 basis points Monday. Sentiment from the US session flowed across to early trading in Australia and New Zealand, where rates on government debt climbed.
A gauge of dollar strength edged lower for a second day and the yen posted a slight gain.
As fears of contagion in the financial sector ease, traders have been cautiously edging toward risk-on sentiment. A gauge of US regional lenders surged about 2.5% as First Citizens BancShares Inc. rallied more than 50% on its agreement to buy SVB Financial Group’s Silicon Valley Bank. First Republic Bank jumped on a Bloomberg report that US authorities are considering expanding an emergency lending facility that would give the lender more time to bolster its balance sheet.
Still, the market remains nervous that the Federal Reserve could be forced to implement higher-for-longer rate hikes to tame inflation. Such a scenario raises the prospects of a recession later this year.
“I think that they are still going to do another 25 or possibly another 50 basis points, and then they’re going to hold it through the end of the year,” Cheryl Smith, portfolio manager at Trillium Asset Management, said on Bloomberg Radio. “They’re going to keep those interest rates high because that’s the only tool that they have, the only tool that they know that will slow down an economy and lead to lower inflation.”
Yet US stocks have largely been shrugging off recession fears with the S&P 500 and Nasdaq both advancing over the past two weeks.
JPMorgan’s chief strategist Marko Kolanovic said the first quarter “will likely mark the high point for equities this year,” recommending investors stay defensive in a research note.
“We view the most vulnerable areas as unprofitable companies that depend on steady flow of equity capital to fund operations and tight carry trades implemented over the last 10 to 20 years,” Kolanovic wrote.
One of Wall Street’s most prominent bears, Morgan Stanley strategist Michael Wilson was also cautious on stocks, saying earnings estimates and valuations need to come down.
In Asia, China’s economic recovery after abandoning Covid Zero remains mixed. Bloomberg’s latest aggregate index of eight early indicators showed growth momentum in March steadied from February. Business confidence and the housing market improved but the global outlook darkened amid heightened financial market turmoil.
Oil extended its climb in early trading in Asia on Tuesday after posting the biggest daily rally since October on Monday. Gold was little changed.
Key events this week:
- US wholesale inventories, US Conf. Board consumer confidence, Tuesday
- EIA Crude Oil Inventory Report, Wednesday
- Eurozone economic confidence, consumer confidence, Thursday
- US GDP, initial jobless claims, Thursday
- Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin speaks at event. Treasury Secretary Janet Yellen also speaks, Thursday
- China PMI, Friday
- Eurozone CPI, unemployment, Friday
- US consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 9:02 a.m. Tokyo time. The S&P 500 rose 0.2%
- Nasdaq 100 futures rose 0.2%. The Nasdaq 100 fell 0.7%
- Japan’s Topix index rose 0.6%
- Australia’s S&P/ASX 200 Index rose 1.1%
- Hong Kong’s Hang Seng futures rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was little changed at $1.0805
- The Japanese yen rose 0.3% to 131.17 per dollar
- The offshore yuan was little changed at 6.8840 per dollar
- The Australian dollar was little changed at $0.6657
Cryptocurrencies
- Bitcoin rose 0.4% to $27,162.42
- Ether rose 0.7% to $1,719.26
Bonds
- The yield on 10-year Treasuries declined one basis point to 3.52%
- Australia’s 10-year yield advanced eight basis points to 3.28%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
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