NEW YORK, RAW – Asian shares were set to open higher on Tuesday as investors shook off earlier worries about a hedge fund default that roiled global banking stocks overnight, while rekindled concerns about inflation pushed bond yields higher.
The firmer tone in Asia comes as Wall Street pared earlier losses driven by the banking sector on fears that issues with a defaulting hedge fund could spread throughout the banking sector.
Nomura and Credit Suisse are facing billions of dollars in losses and regulatory scrutiny after a US investment firm, named by sources as Archegos Capital, defaulted on equity derivative bets, putting investors on edge about who else might be exposed. Shares in Nomura and Credit Suisse declined 16.3 per cent and 13.8 per cent, respectively, on Monday.
In early Asian trade, however, Australian S&P/ASX 200 futures were up 0.44 per cent and Japan’s Nikkei 225 futures had advanced 0.86 per cent.
Michael McCarthy, chief markets strategist at CMC Markets said the worries “are very specific to a small number of hedge funds.”
He said he did not expect any systemic fallout.
Still, the dollar gained on safe-haven buying, while bond prices came under pressure as the outlook for economic growth raised the spectre of inflation, he added.
Benchmark 10-year yields rose to a session high of 1.728 per cent in the US after the state of New York on Monday announced people aged 30 and older could get coronavirus vaccinations starting March 30.
Crude prices inched up on a report that Russia would back broadly stable oil output when the Organisation of the Petroleum Exporting Countries and allies meet this week.
Futures had earlier fallen on news that a container ship in the Suez Canal blocking traffic for nearly a week had been refloated, bringing some relief to concerns about a supply blockage.
Optimism about speedy vaccinations, the record US stimulus, and robust estimates for upcoming earnings, drove the Dow and the S&P 500 to record closing highs last week.
On Wall Street, the Dow Jones Industrial Average rose 0.3 per cent, the S&P 500 lost 0.09 per cent and the Nasdaq Composite dropped 0.6 per cent.
The KBW Nasdaq Bank stock index ended 2.3 per cent lower after falling nearly 3.5 per cent during the session.
“There’s still chatter as to whether or not, and which, American banks may be affected,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.
“That is a question that’s lurking. But so far the market has taken (the news) in stride essentially.”