Asian stocks are poised to follow the global rally as hopes of more government stimulus bolstered riskier assets and overshadowed a host of other worries from the coronavirus to Hong Kong and growing US civil unrest.
E-mini futures for the S&P 500 were up 0.3 per cent and Japan’s Nikkei 225 futures were 1.6 per cent higher in Asia on Wednesday morning, while Australian S&P/ASX 200 futures rose 0.58 per cent in early trading.
That comes after stocks in the United States, Europe and emerging markets hit their highest levels on Tuesday since early March and as bidding for riskier currencies pushed the dollar toward three-month lows and oil neared three-week highs.
From its March 23 low, MSCI’s gauge of stocks across the globe was up 35 per cent. Despite lockdowns to control the COVID-19 pandemic, the global index is down year-to-date only about 8 per cent.
US stocks indexes rose about 1 per cent even as the worst civil unrest in decades left dozens of cities under curfews following protests over the death of an unarmed black man in police custody.
With its gains, the US tech-heavy Nasdaq Composite is down less than 3 per cent from its pre-pandemic record highs.
“The good times continue to roll in risk markets,” Mazen Issa, senior FX strategist at TD Securities, said in a report. “As intense as the rally has been, this is likely set to continue as the breadth of the equity rally has now spread outside the US”
The US Treasury yield curve steepened, reflecting the sale of more government debt to finance massive stimulus efforts. The gap between yields on 5- and 30-year Treasuries reached 116 basis points on Tuesday, its highest since early 2017.
“A steepening curve does give equities a bit of a kick,” said Kim Rupert, senior economist for Action Economics.
Expectations for additional support from the European Central Bank and the German government boosted European stocks and the euro on Tuesday.
Volkswagen, Daimler and BMW, for example, gained more than 5 per cent on confidence that Germany’s proposed 5 billion euro ($US5.6 billion) stimulus package will boost car sales.
The ECB is expected to ramp up stimulative bond purchases when it meets on Thursday.
Oil prices climbed more than 3 per cent, or $US1 a barrel, on Tuesday on renewed US demand for petrol and hopes that major crude producers will agree this week to extend output cuts. US West Texas Intermediate crude (WTI) settled at $US36.81 and Brent crude settled at $US39.57 a barrel.
Gold retreated 1 per cent on Tuesday amid the broader optimism. US gold futures settled down 0.9 per cent at $1,734.
Gold is still up more than 18 per cent from a low of $US1,450.98 in March because of the economic damage from the pandemic and the massive amounts of money coming from central banks.