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Asia Stocks Advance as Worries Over Fed Pivot Ease: Markets Wrap


(Bloomberg) — Most Asian stocks rose Tuesday, tracking a U.S. equity rebound as the prospect of gradual policy tightening tempers some of the concerns about the Federal Reserve’s hawkish tilt. Treasuries and the dollar clawed back some losses.

Japan outperformed, while Australia also advanced. Hong Kong fluctuated and China opened with subdued gains. The S&P 500 rallied the most in five weeks, outperforming the technology-heavy Nasdaq 100, aided by a revival of the value trade in sectors like energy and financials. U.S. equity contracts were steady.

Yields on longer-dated Treasuries rebounded in the U.S. session Monday, even as short-end rates remained firmly anchored. That undid some of the curve-flattening that swept across markets after Fed officials last week accelerated their expected pace of policy tightening.

Brent oil hit $75 a barrel for the first time since April 2019. Bitcoin sank closer to $30,000 after China intensified its cryptocurrency clampdown.

Investors striving to assess the outlook for markets are focused on price pressures and the risk they may pose to the economic recovery from the pandemic. The shift in the Fed’s tone has put the spotlight on the comments coming from policy makers this week.

Chair Jerome Powell, in written remarks, reiterated inflation had picked up but should move back toward the U.S. central bank’s 2% target once supply imbalances resolve. New York Fed President John Williams also said he continues to view the recent spike in inflation as a temporary phenomenon.

Dallas Fed President Robert Kaplan said he favors starting the process of reducing bond purchases “sooner rather than later.” His counterpart from St. Louis James Bullard called it “appropriate” that policy makers opened the taper debate.

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“There’s probably going to be some back and forth here,” said Tracie McMillion, Wells Fargo Investment Institute head of global asset allocation strategy. “There is a lot of cash on the sidelines right now. Some of that is going to be earmarked to go into the markets, and we think the best place right now to be investing is in the equity markets.”

For more market commentary, follow the MLIV blog.

Here are some events to watch this week:

Fed Chair Jerome Powell testifies at a House Subcommittee hearing on the Fed’s pandemic emergency lending and its asset purchase programs TuesdayBank of England interest rate decision Thursday

These are some of the main moves in financial markets:

Stocks

S&P 500 futures were little changed as of 10:27 a.m. in Tokyo. The index advanced 1.4%Nasdaq 100 futures were steady. The gauge rose 0.6%Topix index climbed 2.4%Australia’s S&P/ASX 200 Index added 1.2%Kospi index rose 0.5%Hang Seng Index rose 0.3%Shanghai Composite Index rose 0.3%

Currencies

The yen was little changed at 110.27 per dollarThe offshore yuan traded at 6.4688 per dollarThe Bloomberg Dollar Spot Index rose 0.1% after falling 0.4%The euro was at $1.1904

Bonds

The yield on 10-year Treasuries slipped about two basis points to 1.47%Australia’s 10-year bond yield jumped five basis points to 1.57%

Commodities

West Texas Intermediate crude slipped 0.1% to $73.60 a barrelGold was at $1,784.13 an ounce

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