Asia stocks are set to open firmer after U.S. equities bounced off session lows, with rapid progress in the U.S. vaccine rollout overshadowing the risk of further fallout from recent block sales.
Futures pointed up in Japan and Hong Kong. Australian shares edged higher. S&P 500 Index futures rose after President Joe Biden’s announcement that 90% of adults will be eligible for the Covid-19 vaccine next month. The Dow Jones Industrial Average closed at another all-time peak. Financials dragged the S&P 500 slightly lower, amid revelations that some major banks liquidated holdings in Bill Hwang’s Archegos Capital Management after he failed to meet margin calls.
The dollar held gains, and the yen traded at its weakest levels in a year. Treasury yields rose, taking the 10-year benchmark back above 1.70%. Australia’s 10-year bond yields climbed.
Investors have been focusing on the strength of the recovery and inflation risks as governments step up spending to spur growth. Later this week, the U.S. president plans to unveil a further stimulus program with a tilt toward infrastructure. Positive news on vaccines is helping risk appetite, with a real-world study from Pfizer Inc. and Moderna Inc. showing their doses effectively prevented coronavirus infections, U.S. government researchers said.
“The ongoing smooth vaccination in the U.S. and extensive fiscal support is lifting the growth outlook, and with it, inflation expectations,” said Esty Dwek, head of global market strategy at Natixis Investment Managers. The rise in yields “has not led to flows out of equities. The fundamental support for risk assets is in place,” she said.
Broader markets have seen only small ripples from the forced unwind of Archegos positions so far. The investment-grade credit default swaps index — a gauge of U.S. bond market fear — was calm, though traders are demanding higher rates to hedge potential losses on the debt of banks caught up in the Archegos situation, including Nomura Holdings Inc. and Credit Suisse Group AG.
Oil climbed to the highest in almost two weeks as traders looked to this week’s OPEC+ meeting, with speculation that renewed demand concerns will push the group to keep production in check. Meanwhile, the Suez Canal reopened to traffic after the container ship blocking it was tugged free.
Some key events to watch this week:
- President Biden is expected to unveil his infrastructure program Wednesday.
- EIA crude inventory report Wednesday.
- OPEC+ meets to discuss production levels for May on Thursday.
- China Caixin PMI due Thursday.
- U.S. employment report for March on Friday.
- Good Friday starts the Easter weekend in countries including the U.S., U.K., France, Germany, Australia and Canada.
- S&P 500 futures rose 0.1% as of 8:07 a.m. in Tokyo. The S&P 500 Index declined 0.1%.
- Nikkei 225 futures rose 0.9%.
- Australia’s S&P/ASX 200 Index rose 0.4%.
- Hong Kong’s Hang Seng Index futures rose 0.3%.
- The yen traded at 109.87 per dollar, around the weakest in a year.
- The offshore yuan was at 6.5738 per dollar after falling 0.5%.
- The Bloomberg Dollar Spot Index was steady.
- The euro was at $1.1767.
- The yield on 10-year Treasuries increased four basis points to 1.71%.
- Australia’s 10-year bond yield rose six basis points to 1.75%.
- West Texas Intermediate crude edged up 0.9% to $62.09 a barrel.
- Gold was at $1,711.24 an ounce.
— With assistance by Michael Tobin, Claire Ballentine, and Olivia Raimonde