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Inflation relief, US stimulus drives markets

HONG KONG: Asian markets surged on Thursday on the confidence inflation is a manageable risk and the passage of the $1.9 trillion US stimulus package would supercharge the economic recovery.

“Once volatility in US yields subside and bond fund flows stabilise, credit markets may return their focus back to a positive outlook for earnings, and an incipient V-shaped global rebound fuelled by vaccines and fiscal stimulus,” said DBS strategists Chang Wei Liang and Philip Wee.

“The credit cycle remains fundamentally underpinned by an upturn in the economic cycle, absent any major reversal in US monetary policy settings.”

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US Treasuries added to their gains following mild inflation data from the world’s biggest economy and moderating prices of iron ore and copper.

The 10-year yields fell 3 basis points to 1.48% and the dollar eased 0.3% to 91.5 against a basket of currencies. But gold rose 0.7% to $1,739 per ounce leveraging off a softer dollar.

Japan’s Nikkei 225 index added 0.60%, Hong Kong’s Hang Seng index jumped 1.65%, China’s CSI300 advanced 2.49% but Australia’s S&P ASX 200 ended flat, underperforming the region, as copper prices were down 7.6% from their recent peak, and iron ore down 12.4%. Regionally, the MSCI Asia Pacific index 0.53%.

INFLATION FEAR

Still analysts are asking investors to be watchful about inflation as oil extended gains and prices of metals likely to rise. West Texas Intermediate crude rose 0.8% to $65.16 a barrel and Copper climbed above $9,000 a ton in London after the recent slide.

“Although this month’s US CPI print does not suggest an acceleration in prices, it also does not refute the argument that an inflationary spike is imminent,” said BCA Research economists in a note. 

“Commodity prices will likely remain well bid despite China’s policy tightening thanks to supply tightness and strong demand in the rest of the world.”

Asia Stocks

  • Japan’s Nikkei 225 index added 0.60%
  • Australia’s S&P ASX 200 ended flat 
  • Hong Kong’s Hang Seng index jumped 1.65%
  • China’s CSI300 advanced 2.49%
  • The MSCI Asia Pacific index 0.53%.

Stock of the day

China Hongqiao shares rose as much as 2.2% after it unveiled plans to raise HK$2.3 billion via issue of shares at a premium of 10%.

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Trump’s ‘decoupling’ continues as NYSE delists China’s state oil company 

India refusing to cede sovereign rights for global bond indices

Umesh Desai

Umesh Desai is the Executive Editor at Asia Financial. Prior to this he spent over two decades with Reuters News as Asia Pacific Chief Correspondent in Hong Kong and Bureau Chief in Bombay. Before becoming a journalist Umesh was a credit ratings analyst with Moody's arm in India - ICRA. A chartered accountant by training, Umesh began his career as an equity analyst. His Twitter handle is @umesh_desai

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