HONG KONG- Asia shares joined a global rally on Wednesday as hopes rose for a negotiated end to the Ukraine conflict, while bond markets signaled concern about the US economy overnight after 10-year yields briefly dipped below two year rates.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.28 percent to its highest level in nearly a month, with most Asian stock markets in positive territory, and Chinese blue chips, up 2.5 percent, leading the charge.
Japan’s Nikkei bucked the trend however, falling 1 percent, as observers pointed to profit taking heading into the end of the fiscal year. The benchmark hit a two-month closing high on Tuesday.
Ukraine, on Tuesday, proposed adopting a neutral status in a sign of progress at face-to-face negotiations, though on the ground, reports of attacks continued, and Ukraine reacted with skepticism to Russia’s promise in negotiations to scale down military operations around Kyiv.
The rally looked set to peter out later in the day however, as while US and European shares had risen sharply overnight, futures pointed to a lower open on Wednesday.
EUROSTOXX 50 futures shed 0.18 percent, FTSE futures and US S&P 500 futures were flat.
“On the one hand there has been more positive news regarding Ukraine, and the market is hopeful of a peace deal at some point, which is resulting in a bit of a ‘risk-on’ event, with shares up,” said Shane Oliver chief economist and head of investment strategy at AMP Capital.
“But then it’s back to worrying about inflation and bond yields, and there’s this debate about whether we’re going to see a recession in the US because of the inversion of part of the US yield curve.”
The widely tracked US 2-year/10-year Treasury yield curve briefly inverted on Tuesday for the first time since September 2019, as bond investors bet that aggressive tightening by the Federal Reserve could hurt the US economy over the longer term. – Reuters
