Market Overview

Asian stocks hit record high as earnings, stimulus boost recovery hopes

Asian stocks hit a record high on Wednesday as upbeat earnings, hopes of a large U.S. fiscal stimulus and a prolonged period of low interest rates fanned optimism about a global recovery from the pandemic. European stocks are expected to open sharply higher, with Euro Stoxx future up 0.47% and Britain’s FTSE futures trading 0.56% higher.

MSCI’s ex-Japan Asian shares index rose 0.86%, breaking above its January peak to reach its highest level ever. In mainland China’s CSI300 rose 2.1% to a 13-year high and the Shanghai Composite hit a five-year high on the last trading day before the week-long lunar new year holidays.

Japan’s Nikkei eked out gains of 0.19% while e-mini futures for the U.S. S&P 500 rose 0.35% after a mixed day on Wall Street as corporate earnings have been beating expectations in many places including the United States and Japan. In the latest example, shares of Lyft Inc rose as much as 11.8% while Twitter Inc climbed 3.5% in aftermarket trading on their latest quarterly results.

Although U.S. President Joe Biden’s stimulus package faces opposition from Republicans, his fellow Democrats last week approved a budget outline that will allow them to muscle the stimulus through in the coming weeks without Republican support.

The prospects of the large U.S. relief package drove U.S. bond yields higher, with the yield on the benchmark U.S. 10-year Treasury notes last at 1.16%, not far off Monday’s 10 1/2-month high of 1.20%. Higher bond yields also reflect rising inflation expectations, with break-even inflation calculated from inflation-protected Treasuries rising to 2.20%, the highest since 2014. The Fed has said it would tolerate inflation rising beyond 2% temporarily, leaving investors to believe low interest rates will stay at least until 2023. U.S. inflation data, due later on Wednesday, is expected to show an annual rise of 1.5% in core CPI.

The dollar traded at 104.57 yen after 0.64% fall on Tuesday, its biggest in three months, while the euro changed hands at $1.2124, extending its rebound from a two-month low of $1.1952 touched on Friday. The British pound held firm at $1.3822, hitting its highest level since April 2018. The offshore Chinese yuan held firm at 6.4262 to the dollar, within sight of its 2 1/2-year high of 6.4119 set on Jan. 5. A weaker dollar fed renewed strength in cryptocurrencies.

Asian stocks hit record high as earnings, stimulus boost recovery hopes, Reuters, Feb 10

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