SYDNEY – Asian share markets inched up on Monday as expectations for faster economic growth and inflation globally battered bonds and boosted commodities, though rising real yields were making equity valuations look more stretched in comparison.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.2 percent, after slipping from a record top last week as the jump in US bond yields unsettled investors.
Japan’s Nikkei recouped 1.0 percent and South Korea 0.4 percent, but Chinese blue chips lost 1.2 percent.
S&P 500 and EUROSTOXX 50 futures were both hesitating around flat, while FTSE futures fell 0.6 percent.
Bonds have been bruised by the prospect of a stronger economic recovery and yet greater borrowing as President Joe Biden’s $1.9 trillion stimulus package progresses.
“Yield curves have continued to steepen, as COVID infection rates decline further, reopening plans are discussed and a large US fiscal stimulus package looks likely,” said Christian Keller, Barclays’ head of economics research.
“This in principle signals a better mediumterm growth outlook for the US and beyond, as other core yields curves are moving in the same direction,” he added. “Meanwhile, central banks seem set to look through this year’s inflation increase, keeping the curves’ front end anchored.”
Federal Reserve Chair Jerome Powell delivers his semi-annual testimony before Congress this week and is likely to reiterate a commitment to keeping policy super easy for as long as needed to drive inflation higher.
