Asian stocks will likely climb on Thursday after the S&P 500 and Nasdaq rallied to fresh records on upbeat corporate results, while the dollar eased a day before the U.S. Federal Reserve possibly sets a new course on inflation.
SYDNEY: Asian shares touched two-year peaks on Thursday in the wake of Wall Street’s record run as cheap cash drove up big-cap tech darlings, although Sino-U.S. tensions caused caution to creep in as the session progressed.
MSCI’s broadest index of Asia-Pacific shares outside Japan turned flat after earlier reaching its highest since August 2018.
Japan’s Nikkei eased 0.4per cent from levels not seen since mid-February, and South Korea fell 0.8per cent as a jump in coronavirus cases ended four days of rises.
Even S&P 500 futures dipped 0.2per cent, although that followed five straight sessions of gains.
Asian investors turned more circumspect because of the military face-off in the South China Sea, as Washington blacklisted 24 Chinese companies while Beijing reportedly test fired missiles into the area on Wednesday.
Yet markets globally are still focused on the endless liquidity being pumped out by central banks.
Federal Reserve Chair Jerome Powell is expected to outline a more flexible approach to policy on Thursday including a shift to targeting an average inflation rate around 2per cent that will allow rates to stay super-low for longer.
“So with U.S.-China tensions seemingly not a major concern, the deluge of fiscal and monetary support remains the overriding tail wind for risk assets with large cap the beneficiaries,” said Rodrigo Catril, a senior FX strategist at NAB.
The Dow ended Wednesday up 0.3per cent, while the S&P 500 climbed 1.02per cent and the Nasdaq 1.73per cent. Gains were again concentrated in the tech majors with Netflix Inc surging 11.6per cent and Facebook Inc 8.2per cent.
The liquid largesse from central banks has kept sovereign bonds well supported even as stocks reach new highs. Yields on 10-year Treasuries have steadied at 0.68per cent, after finding solid bids around 0.73per cent.
At the same time, the prospect of even more easing from the Fed has kept the dollar on the defensive. Against a basket of currencies, it was stuck at 92.921 on Thursday and uncomfortably close to the recent two-year trough of 92.124.
The euro held at US$1.1832 and near its recent top of US$1.1965, while the dollar backed off to 106.02 yen from a high of 106.57 earlier in the week.
The dollar has also been steadily trending lower on the Chinese yuan to reach depths not seen since mid-January at 6.885 yuan .
In commodity markets, gold eased back to US$1,943 an ounce and remains short of its August peak of US$2,072.
Oil prices were underpinned as U.S. producers shut output in the Gulf of Mexico ahead of Hurricane Laura.
Brent crude futures edged up 5 cents to US$45.69 a barrel, while U.S. crude dipped 5 cents to US$43.34.
(Editing by Richard Pullin)