Asia stocks fluctuated in early trade as investors weighed rapid progress in the U.S. vaccine rollout against the risk of further fallout from recent block sales.
Japan shares fell and S&P 500 Index futures wavered as traders assessed the broader impact of the Archegos blowup on lenders. Financials led the benchmark to a slightly weaker close, on news that some major banks had liquidated holdings. President Joe Biden’s announcement that 90% of adults will be eligible for the Covid-19 vaccine next month helped U.S. stocks rally from their lows, and the Dow Jones Industrial Average closed at another all-time peak. Shares edged higher in Australia and South Korea.
The dollar held gains, and the yen traded at its weakest levels in a year. Ten-year Treasury yields rose back above 1.70%. Australia’s benchmark rate also 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.
Read: Archegos Drama Hardly Ruffles a Market That’s ‘Drunk on Risk’
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.
HSBC Senior Economic Advisor Stephen King speaks with Bloomberg’s Guy Johnson and Alix Steel about the Archegos fallout, and the path to global recovery as lockdowns begin to lift.
Source: Bloomberg
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.
Stocks
- S&P 500 futures were flat as of 9:19 a.m. in Tokyo. The S&P 500 Index declined 0.1%.
- Topix Index fell 0.8%.
- Australia’s S&P/ASX 200 Index rose 0.2%.
- South Korea’s Kospi Index rose 0.7%.
Currencies
- The yen traded at 109.81 per dollar, around the weakest in a year.
- The offshore yuan was at 6.5788 per dollar after falling 0.5%.
- The Bloomberg Dollar Spot Index was steady.
- The euro was at $1.1767.
Bonds
- The yield on 10-year Treasuries increased held at 1.71%.
- Australia’s 10-year bond yield rose five basis points to 1.74%.
Commodities
- West Texas Intermediate crude edged up 0.5% to $61.84 a barrel.
- Gold was at $1,711.29 an ounce.
— With assistance by Michael Tobin, Claire Ballentine, and Olivia Raimonde
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March 30, 2021 at 04:01AM
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