* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Asia index from all-time top, Japan on vacation
* Biden announces new stimulus plans this week
* The highest government bond yields since March in reflation trading
* Oil prices close to 11 month high with supply restrictions
Posted by Wayne Cole
SYDNEY, January 11th (Reuters). Asian stocks held near historic highs on Monday while government bond yields hit a 10-month high as “trillions” were to be featured in new US stimulus packages this week, sparking global reflation trading.
Investors kept US policies on their toes as pressure to indict President Donald Trump increased, despite indications that an actual trial may still be some time away.
MSCI’s broadest index for stocks in the Asia-Pacific region outside of Japan fell 0.2% after rising 5% to record highs last week. Japan’s Nikkei was on vacation after closing at a 30-year high on Friday.
South Korea reversed an early jump and fell 1.5%. The Chinese blue chips remained stable.
“With its references, Asia has survived the second global crisis in this millennium,” said ANZ chief economist Richard Yetsenga.
“Asia’s growth is stronger and, for the most part, has better demographics and debt levels than the developed world.”
He noted that a turnaround between the semiconductor and energy sectors highlighted Asia’s success as the region produced around 45% of the world’s semiconductors.
“For the first time, the global semiconductor sector’s market cap has outperformed energy,” he said. “At the time of the last crisis 12 years ago, the energy sector was more than five times bigger.”
Futures for the S&P 500 were down 0.6% from their all-time highs, after rising 1.8% last week. EUROSTOXX 50 futures fell 0.1% and FTSE futures remained unchanged.
Longer-term government bond yields were at their highest level since March after Friday’s weak jobs report only sparked speculation about further fiscal stimulus in the US after Democrats took control of the government.
President-elect Joe Biden is due to announce plans for “trillions” in new relief legislation this week, much of which will be paid for through increased borrowing.
At the same time, the Federal Reserve is content to hold fiscal policy accountable. Vice Chairman Richard Clarida said the Fed’s $ 120 billion debt, which the Fed buys every month, is not going to change anytime soon.
With the Fed unwilling to buy longer-dated bonds, ten-year government bond yields rose nearly 20 basis points last week to 1.12%, the largest weekly increase since June.
Treasury futures lost another 3 ticks early Monday.
BofA’s Mark Cabana warned that a stimulus could put further pressure on the dollar and cause the Fed to taper later this year.
“An early taper by the Fed carries upside risks to our 10-year Treasury target of 1.5% by the end of the year and supports our longer-term expectations for neutral rates towards 3%,” he said in a statement to clients.
The poor payroll report will fuel interest in US data on inflation, retail sales, and consumer sentiment.
Earnings will also be in focus as JP Morgan, Citigroup and Wells Fargo are among the first to release fourth quarter results on January 15th.
The rise in yields, in turn, provided some support for the exited dollar, which was up from 89.206 in the basket to 90.439 last week.
The euro retreated to $ 1.2170 from a recent high of $ 1.2349, breaking the $ 1.2190 support. The dollar also strengthened from a low of 102.57 yen last week to 104.18 yen.
The sudden surge in bond yields undermined gold, which pays no interest, and the metal fell 1.1% from its recent high of $ 1,959 to $ 1,828 an ounce.
Oil prices participated in profit-taking after hitting their highest level in nearly a year on Friday. In the week that Saudi Arabia pledged to cut production, they rose 8%.
The Brent crude oil futures fell 65 cents to $ 55.34, while the US crude oil futures lost 41 cents to $ 51.83 a barrel.
(Adaptation by Sam Holmes)