SYDNEY, RAW – Asian stocks have risen for a third straight session with risk appetite aided by recent data showing the world economic recovery is well on track while the US dollar loiters near two-month lows.
MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.2 per cent to 699.63, the highest since March 18.
The index has had a strong run lately as it clocked its second consecutive weekly rise on Friday and was on track for another month of gains.
Since April 2020, the index has offered positive returns in all but three months.
South Korea’s KOSPI index rose 0.3 per cent while New Zealand shares added 0.6 per cent.
Japan’s Nikkei was down 0.3 per cent while Australia’s benchmark share index was off a shade too with a public holiday in five of the country’s eight states and territories.
Risk appetite was whetted by early April manufacturing activity indicators out last week, which pointed to a robust start to the second-quarter with data hitting record highs in the United States and signalling an end to Europe’s double dip recession.
Investors embraced the strong data, shrugging off earlier concerns about potential higher US taxes on capital gains under the Biden administration.
On Friday, US shares ended firmer with the S&P 500 hitting a record intraday peak to end 1.1 per cent higher. The Dow rose 0.7 per cent while the Nasdaq Composite added 1.4 per cent.
E-mini futures for the S&P 500 were slightly weaker in early Asian trading on Monday.
First-quarter US gross domestic product data is due later in the week with expectations activity will have likely returned to pre-pandemic levels.
“We estimate that the economy will close the output gap and rise above potential in the second half of this year,” ANZ economists wrote in a morning note, suggesting more upside for shares.
Europe “cannot match this but as 2021 progresses into 2022, the growth differential to the US will narrow.”
That said, some economists say the market could hit a soft patch in coming months reflecting concerns ranging from rising COVID-19 cases and worries most of the benefits from massive fiscal stimulus have already been priced in.
“Stated differently, this may be the last quarter where companies can avoid being penalised for not seeing revenue recover quickly and/or not giving guidance,” JPMorgan analysts wrote.
They said the “bull case” for equities would be supported by re-opening from coronavirus lockdowns, consumer spending and corporate earnings combined with reduced market volatility.
The “bear case”, on the other hand, would be triggered by inflation, delays to re-opening, weaker economic growth and corporate profits and a commodity recession.
Strong recent data meant bonds were sold off, though 10-year US Treasury yields were not far from a recent six-week low on expectations the US Federal Reserve will stay accommodative at its meeting this week.
In currencies, Turkey’s lira edged lower adding to a recent slide and nearing an all-time low as a chill settled on relations with the US and after the new central bank chief signalled rate hikes would harm the economy.
The US dollar’s index was last at 98.881 against a basket of major currencies, not too far from last week’s low of 90.808, a level not seen since March 3.
The greenback was a shade weaker on the safe-haven Japanese yen at 107.82. Against the euro, it was down 0.1 per cent at $1.2090.
The risk sensitive Australian dollar stayed trapped in a narrow band to be last at $0.7744.
In commodities, US crude fell 13 cents to $US62.01 per barrel and Brent was at $US65.93, up 18 cents in early Asian trading.
Gold was barely changed at 1,776.56.