Asian shares advanced and U.S. long-dated bond yields edged up to a five-month high. This is on rising optimism about the global economy and corporate earnings. Japan’s Nikkei rose 0.8% while MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.3%. Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities said that earlier this month, stagflation was the buzzword on Wall Street. But now excessive pessimism is receding, especially after strong U.S. retail sales data.
In New York, the benchmark S&P 500 index gained 0.74%. This is while the CBOE market volatility index fell 0.6 point. Fujito said that the tech shares and other high-growth shares that would have been sold on rising bond yields are rallying. This clearly shows that there is now strong optimism on upcoming earnings. Dutch chip-making machine maker ASML Holdings and Tesla are among those. The positive mood saw U.S. bond yields rising further. Investors expect the Fed to announce tapering of its bond buying. Naokazu Koshimizu, senior strategist at Nomura Securities said that the Fed is likely to become more hawkish. While the Fed will maintain tapering is not linked to a future rate hike, the market will likely try to price in rate hikes and flatten the yield curve.
In the currency market, rising U.S. yields helped to boost the U.S. dollar to a four-year high. This is against the yen at 114.585 per dollar. In addition to U.S. yields, the yen was dented by expectations of a wider trade deficit in Japan. This is due to rising oil prices. The Chinese yuan held firm, trading at 6.3760 per dollar in the offshore trade. The euro was steadier at $1.1643. In cryptocurrencies, bitcoin stood at $64,068. Oil prices eased slightly in Asia. U.S. crude futures traded at $82.65 per barrel.