Asia share rally keeps global bull run on track

By Scott Murdoch and Hideyuki Sano

HONG KONG (Reuters) – Asian shares rallied on Tuesday, setting the stage for world equities to extend their bull run for a 12th consecutive session, as investors banked on a rollout of coronavirus vaccines to keep the global economic recovery on track.

Oil prices jumped to a 13-month high as a deep freeze due to a severe snow storm in the United States not only boosted power demand but also threatened oil production in Texas.

Asia’s surging shares set the way for renewed optimism on global markets.

S&P500 futures were up 0.5% and MSCI’s all country world index (ACWI), which has risen every day so far this month, ticked up slightly.

MSCI’s broadest index of Asia-Pacific shares outside Japan shot up 0.62%, while Japan’s Nikkei rose 1.4% to a 30-year high.

In Hong Kong, the Hang Seng Index rose 1.4% to hit a 32-month high, while Australia’s S&P/ASX200 gained 0.7% for the session. Mainland Chinese markets will remain closed for the holidays until Thursday.

The positive sentiment was also extended to Bitcoin which flirted with breaking through the $50,000 barrier.

Bitcoin was trading at $49,323.56 in the Asian afternoon trading session, slightly below its record high of $49,715 hit on Sunday..

JPMorgan Private Bank head of Asia investment strategy Alex Wolf said the ongoing coronavirus vaccine rollout was giving investors confidence that global growth would be protected in 2021.

“This is a positive factor that we are coming into the process of economic normalisation,” Wolf said.

Ord Minnett advisor John Milroy said while share markets were positive investors were becoming wary of the future risk of inflation due to central bank and government stimulus programmes in place around the world.

“There is a clear sense with rates staying low for some time yet and investor appetite for equities staying strong we will likely see markets hold up for some time yet,” Milroy told Reuters.

“Gaining traction is the thought that inflation could rise much faster and sooner than the Fed is currently thinking. Then if they do raise rates to combat it what happens to equity markets and of course bond markets.”

The bullish view on the economy lifted bond yields, with the 10-year U.S. Treasuries gaining 5 basis points to 1.24% in Asian trade, its highest since late March.

Investors are looking to the minutes from the U.S. Federal Reserve’s January meeting, due to be published on Wednesday, for confirmation of its commitment to maintain its dovish policy stance over the near future. That in turn is set to keep a tab on bond yields.

But some analysts say investors should keep a wary eye on bond yields.

“If U.S. bond yields keep rising, that could start to unsettle stocks,” said Masahiro Ichikawa, chief strategist at Sumitomo Mitsui DS Asset Management.

Wolf said JPMorgan’s private bank forecast U.S. 10-year yields could reach 1.5% by the end of 2021, as investors again banked on further economic stimulus which could help global growth prospects.

“An increase in yields is not a large concern for the rest of the world. It’s the pace of the increase that tends to matter most from an Asian perspective. If there’s a rapid repricing then that can have a negative effect for emerging markets,” he said.

U.S. President Joe Biden is pushing ahead with his plan to pump an extra $1.9 trillion in stimulus into the economy, in a further boost to market sentiment.

U.S. crude futures were trading up 1.1% at $60.11 per barrel.

(Additional reporting by Tomo Uetake in Sydney; Editing by Shri Navaratnam and Richard Pullin)