Asian shares make cautious gains as Wall Street rises on falling US yields

Asian equities made early trading gains on Thursday after a mixed session Wall Street buoyed by expectations of a US stimulus package even as political events in Washington culminated in the impeachment of President Donald Trump.

US Treasury yields posted their first full-session decline in 2021 after rising for six straight sessions as investors eyed more spending by the incoming US administration. The benchmark S&P 500 had closed slightly higher driven by rate-sensitive defensive sectors such as utilities and real estate, while economically-sensitive cyclical sectors lagged.

“There (is) this push-pull relationship between what happens in the bond market and equity markets,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

“Bond yields have risen in prospect of more stimulus spending and if yields continue to rise, there’s going to be some pressure on equity markets.”

Australian S&P/ASX 200 futures rose 0.21 per cent in early trading, while Hong Kong’s Hang Seng index futures rose 0.23 per cent.

Also read: S&P 500 ends with slightest gain as small caps favored

Intel Corp was the biggest percentage gainer in the S&P, advancing 7 per cent after the chipmaker said it would replace its Chief Executive Officer Bob Swan with VMware Inc CEO Pat Gelsinger next month.

Wall Street’s main indexes had hit record highs last week on expectations for a hefty Covid-19 relief package, which President-elect Joe Biden is due to unveil on Thursday.

Following the storming of the US Capitol, the House of Representatives voted on Wednesday to impeach Donald Trump,making him the first US president to be impeached twice.

On Wall Street, the Dow Jones Industrial Average fell 0.03 per cent, the S&P 500 gained 0.23 per cent, and the Nasdaq Composite added 0.43 per cent. Several Federal Reserve officials pushed back against the idea of the central bank tapering its asset purchases any time soon despite expectations of higher inflation.

The climb in yields is expected to resume, partly due to the effect of the stimulus package from the Biden administration, which will be inaugurated next week. An auction of $24 billion in 30-year bonds was well bid, further pressuring yields lower. Benchmark 10-year notes last rose 13/32 in price to yield 1.0951 per cent, from1.138 per cent late on Tuesday.

Also read: S&P closes higher with defensive sectors leading gains

The US dollar rebounded from near three-week lows on Wednesday, rising broadly on hopes of increased government spending.

The dollar index rose 0.357 per cent, with the euro down 0.42 per cent to $1.2156. The Japanese yen weakened 0.11 per cent versus the greenback at 103.87 per dollar.

Oil prices fell as the threat of lower demand due to rising global Covid-19 cases outweighed support from a greater-than-anticipated drop in US crude inventories.

US crude recently fell 0.6 per cent to $52.89 per barrel and Brent was at $56.04, down 0.95 per cent on the day.

Spot gold dropped 0.4 per cent to $1,848.05 an ounce. Silver fell 1.38 per cent to $25.22.