Asian equities look poised to open slightly higher Tuesday after US financial shares rose and Treasuries fell as fears of broader contagion from the banking turmoil eased.
(Bloomberg) — Asian equities look poised to open slightly higher Tuesday after US financial shares rose and Treasuries fell as fears of broader contagion from the banking turmoil eased.
Futures pointed to small gains for benchmarks in Japan, Hong Kong and Australia. 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 topped 4%, with sentiment from the US market flowing across to early trading in Australia and New Zealand, where rates on government debt climbed.
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.
“There’s no doubt that the response so far has prevented the situation from becoming much worse and confidence will gradually improve as long as no other banks fall into difficulties,” Craig Erlam, a senior market strategist at Oanda wrote. “That’s obviously a big if at this point.”
Still, Seema Shah, chief global strategist at Principal Asset Management, told Bloomberg TV that many US stocks were expensive and unappealing ahead of a looming economic slump.
“If you’re looking outside of the US, valuations are still pretty cheap,” she said. “There’s very little to be attractive about this US market at this stage.”
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.
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.
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 7:16 a.m. Tokyo time. The S&P 500 0.2%
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.7%
- Nikkei 225 futures rose 0.3%
- Hang Seng futures rose 0.2%
- S&P/ASX 200 futures rose 0.4%
Currencies
- The euro was little changed at $1.0799
- The Japanese yen was little changed at 131.54 per dollar
- The offshore yuan was little changed at 6.8849 per dollar
- The Australian dollar was little changed at $0.6649
Cryptocurrencies
- Bitcoin rose 0.5% to $27,182.25
- Ether rose 0.3% to $1,712.64
Bonds
- The yield on 10-year Treasuries advanced 15 basis points to 3.53%
- Australia’s 10-year yield advanced nine basis points to 3.28%
Commodities
- West Texas Intermediate crude was little changed
This story was produced with the assistance of Bloomberg Automation.
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