From Swati Pandey
SYDNEY (Reuters) – Asian stocks rose for the third straight year on Monday as risk appetite was bolstered by recent data showing the global economic recovery from the coronavirus pandemic was well on track while the US dollar was in remained near two-month lows.
MSCI’s broadest index for stocks in the Asia-Pacific region outside of Japan rose 0.2% to 699.63, its highest level since March 18.
The index has seen a strong uptrend recently as it posted its second consecutive weekly rise on Friday and was on track for another month of gains. As of April 2020, the index has been offering positive returns in all but three months.
The South Korean KOSPI index rose 0.3%, while New Zealand stocks rose 0.6%.
Japan’s Nikkei fell 0.3% while the Australian benchmark index was also in the shadows, with a public holiday in five of the country’s eight states and territories.
The appetite for risk was aroused by the indicators for manufacturing activity in early April last week, which pointed to a robust start to the second quarter. The data hit record highs in the US and signaled an end to the double-dip recession in Europe.
Investors welcomed the strong data and brushed off previous concerns about possible higher US taxes on capital gains under the Biden administration.
On Friday, US stocks ended firmer as the S&P 500 hit a record intraday high and ended up 1.1%. The Dow was up 0.7% while the Nasdaq Composite was up 1.4%.
The E-Mini-Futures for the S&P 500 were slightly weaker in early Asian trading on Monday.
US GDP data for the first quarter is due later in the week, with expected activity likely to return to pre-pandemic levels.
“We estimate that the economy will close the output gap and rise above potential in the second half of the year,” wrote the ANZ economists in a morning note, suggesting more upside potential for stocks.
Europe “cannot keep up, but as 2021-2022 advances, the growth gap with the US will narrow.”
However, some economists say the market could hit a weak point in the coming months, driven by concerns ranging from rising COVID-19 cases to fears that most of the benefits of massive fiscal stimulus are already priced in.
“In other words, this could be the final quarter where companies cannot be penalized if they fail to see earnings recover quickly and / or fail to provide guidance,” JPMorgan analysts wrote in a note.
They said the “bull case” for stocks would be aided by the reopening of coronavirus lockdowns, consumer spending and corporate earnings combined with reduced market volatility.
The “bear fall”, on the other hand, would be triggered by inflation, reopening delays, weaker economic growth and corporate earnings, and a commodity recession.
Strong recent data meant bonds were sold even though ten-year US Treasury yields were not far from a recent six-week low as the US Federal Reserve is expected to remain accommodative at its meeting this week.
In currencies, Turkey’s lira fell, contributing to a recent decline and nearing an all-time low as relations with the United States cooled and after the new central bank chief signaled that rate hikes would hurt the economy.
The US dollar index was last at 98.881 against a basket of major currencies, not far from last week’s low of 90.808, a level not seen since March 3rd.
The greenback was slightly weaker in the safe haven yen at 107.82. Against the euro it fell 0.1% to USD 1.2090. The risk-sensitive Australian dollar remained trapped in a narrow band, most recently trading at $ 0.7744.
For commodities, U.S. crude fell 13 cents to $ 62.01 a barrel and Brent was at $ 65.93, up 18 cents in early Asian trading.
Gold was barely changed at 1,776.56.
(Adaptation by Sam Holmes)