Asian stocks hit a record high on Monday as vaccine optimism and strong economic data from China and Japan outshone worries about rising coronavirus cases, lifting just about every sector. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1% to hit its highest since its launch in 1987 with markets across the region making milestone peaks. Japan’s Nikkei traded at 29-year highs, South Korea’s Kospi at its highest since early 2018 and Australia’s ASX 200 hit an eight-month peak in the morning, before a glitch halted trade. S&P 500 futures rose 0.6% following the index’s record close on Friday, Nasdaq 100 futures leapt 1% and European futures were up strongly with EuroSTOXX 50 futures up 0.8% and FTSE futures up half a percent.
“There’s just mountains of cash sitting on the sidelines, waiting to be put to work and since we’ve got this vaccine news, as well as diminished risk around the U.S. elections, all of this is flying into equities,” said Kyle Rodda, analyst at IG Markets. “Everyone’s thinking now that it’s the cue to get in.”
Sterling crept higher against the dollar and euro. The common currency rose 0.1% against the dollar to $1.1848. The kiwi rose 0.5% to $0.6883 while the Australian dollar lagged a tad ahead of a week of central bank speeches and significant data, beginning with Reserve Bank of Australia Governor Philip Lowe at 0840 GMT. Bonds, which had sold off strongly on vaccine news last week, were steady with where they left off on Friday, with the yield on benchmark U.S. 10-year debt at 0.8930%, down from last week’s high above 0.97%. Oil prices inched higher, with Brent crude futures up 0.7% at $43.08 a barrel but below last week’s two-month high of $45.30. U.S. crude rose 1% to $40.55 a barrel. Gold rose 0.4% to $1,896 an ounce.
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Why did the Asian stocks rise?
Japanese economic growth, which beat records and forecasts to pull the world’s third-largest economy out of recession and better-than-expected industrial output in China were the major reason behind this. But the RCEP trade deal. which was signed by 15 Asia-Pacific economies, including China and Japan, but excluding the United States, is also being seen as a major reason for the rise.
Is there reason to be cautious?
There is ofcourse reason to be cautious as Axios reported that US president Donald Trump is planning a flurry of aggressive policy moves against China in the coming weeks. Also, coronavirus cases are surging in Europe and the United States and new outbreaks have emerged in South Korea, Japan and Australia. In Britain, Brexit talks are at delicate crossroads again. These fears kept currency market moves in check and left oil well below last week’s peaks as traders brace for a grim winter ahead.
(with agency inputs)
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