Asian stocks lifted by Wall Street gains as easing oil cools inflation fears

Reuters | | Updated on: Jun 27, 2022
A screen displaying market indices from around the world and foreign currency rates against the Japanese yen at the Tokyo Stock Exchange in Tokyo (file picture). 

A screen displaying market indices from around the world and foreign currency rates against the Japanese yen at the Tokyo Stock Exchange in Tokyo (file picture).  | Photo Credit: Issei Kato

Nikkei rallies over 1 per cent, while Australia's benchmark jumps 1.7 per cent

Stocks gained in Asia on Monday amid improved risk sentiment after Wall Street rebounded strongly at the end of last week as oil prices eased, tempering fears of prolonged inflation and the accompanying aggressive Federal Reserve tightening.

Treasury yields remained subdued and the dollar hovered near the lowest in more than a week as investors continued to assess the outlook for US rate hikes, and the potential for a recession.

Japan's Nikkei rallied 1.04 per cent, while Australia's benchmark jumped 1.69 per cent.

Chinese blue chips rose 0.54 per cent and Hong Kong's Hang Seng advanced 1.46 per cent.

South Korea's Kospi gained 1.65 per cent. MSCI's broadest index of Asia-Pacific shares rose 1.31 per cent.

However, US stock futures point to a 0.25 per cent decline when those markets re-open. On Friday, the S&P 500 surged more than 3 per cent, adding to an almost 1 per cent gain on Thursday.

"We've had a decent end to the week in the US markets and I think that's going to be the main scene for Monday here in Asia," amid a dearth of news or other new drivers, said Rob Carnell, chief economist for Asia-Pacific at ING.

"We've had two decent equity days on the run now. It's perhaps notable that you've had some consistency there."

Crude oil fell in volatile trading on Monday as the market grapples with concerns that a global economic slowdown could depress demand versus worries about lost Russian supply amid sanctions over the Ukraine conflict.

Both Brent and US West Texas Intermediate (WTI) futures fell more than a dollar earlier. But, prices have rebounded, with Brent at $112.78 a barrel, down 34 cents, and WTI at $107.17, down 45 cents.

US long-term Treasury yields hovered around 3.13 per cent, after bouncing off a two-week low just above 3 per cent at the end of last week as traders removed bets for hikes next year, but still pondered if aggressive tightening this year could trigger a recession.

Yields have dropped from 3.456 per cent, the highest in more than a decade, reached before the mid-month Fed meeting. Then, the central bank hiked rates by 75 basis points, the biggest increase since 1994, and signalled that a similar move is possible in July.

"The market remains focused in the trade-off between the policy response to high inflation and fears of a hard landing," Westpac rates strategist Damien McColough wrote in a client note.

"There will be ongoing discussions as to whether long-end yields have peaked, however we would not yet expect 10-year yields to fall materially or sustainably below 3 per cent."

The dollar was steady on Monday, continuing to consolidate near the lowest since the middle of the month against major peers.

The dollar index, which measures the currency versus six rivals, was little changed at 104.01, after gradually gravitating over the past few sessions toward the June 17 low of 103.83.

Gold ticked 0.32 per cent higher to $1,832.10 per ounce.

Published on June 27, 2022
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