Asian shares buoyed by banner day for Wall Street

Equities across Asia-Pacific were broadly higher on Tuesday, a day after Wall Street posted its best performance in almost nine months as a rebound rally in government debt soothed investors’ nerves.

Hong Kong’s benchmark Hang Seng index climbed 0.6 per cent in morning trading, while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks added 0.3 per cent. Australia’s S&P/ASX 200 gained 0.4 per cent.

Japan’s Topix broke ranks with the region, slipping 0.3 per cent after finalised data showed capital expenditure in the fourth quarter fell almost 5 per cent from a year ago. That was a sharp departure from a preliminary reading showing a 4.5 per cent rise, and raised questions about the strength of the country’s economic recovery.

The moves in Asia followed a banner session for Wall Street, which closed out with a 2.4 per cent rise for the blue-chip S&P 500 and a 3 per cent rally for the technology-focused Nasdaq.

Gains for equities came as government debt markets extended their rebound after last week’s sell-off. The yield on the 5-year US Treasury, which was at the centre of the turmoil, dropped 0.03 percentage points on Monday. The 5-year yield declined another 0.1 percentage point to 0.69 per cent in Asia trading on Tuesday, while the 10-year yield was down by the same amount at 1.41 per cent. Bond yields fall as prices rise.

“While it may be tempting to conclude that the equity market is getting used to higher yields, this also means that this takes away one of the hurdles for yields to keep moving higher,” said Robert Carnell, head of Asia-Pacific research at ING. “What would undermine an uptrend in bond yields would be a big collapse in risk appetite.”

Australian bond yields were largely steady, with the 10-year yield down 0.1 percentage points at 1.642 per cent. That followed a tumble of almost 0.25 percentage points to 1.67 per cent on Monday after the Reserve Bank of Australia doubled the size of its regular purchases of long-term bonds as borrowing costs soared.

Focus has shifted to the RBA’s interest rates decision later on Tuesday, with the central bank expected to keep its cash rate target at a record low of 0.1 per cent.

“Australia has shown strong external resilience despite an increase in trade tensions with China, the Covid pandemic and earlier from the downturn in global trade engineered by Trump-era tariffs,” said Josh Williamson, chief Australia economist at Citigroup, which recently upgraded the country’s fourth-quarter growth forecast to 2.9 per cent.

In commodities markets, oil prices continued to drop ahead of an Opec+ meeting this week that could result in an increase in supply. Brent crude, the international benchmark, was down 1.7 per cent at $62.62 a barrel while West Texas Intermediate, the US marker, fell the same amount to $59.58.

Futures tipped the S&P 500 to fall 0.2 per cent when trading resumes on Wall Street.