MSCI’s largest Asia-Pacific stock index outside of Japan .MIAPJ0000PUS rose 0.1%, as gains by semiconductor manufacturers drove Japan’s Nikkei .N225 higher 1.8% to a six-month high.[.T]
The rally follows Wednesday’s gains in Europe and Wall Street – which left the S&P 500 .SPX just steps from a closing record. But futures prices suggest the latest wave of optimism may wane in the European day.
Euro STOXX 50 STXEc1 futures fell 0.1% for the last time, FTSE FFIc1 futures fell 0.7% and S&P 500 ESc1 futures fell 0.1%.
“People look at the glass half full and test the waters,” said Moh Siong Sim, currency analyst at the Bank of Singapore.
Throughout the week, a massive sell-off in the US bond market, as investors digest the biggest 10-year paper auction, raised yields enough to trigger a sharp pullback in gold as well as a fall in the yen as the flows arrive from Japan.
At the same time, the number of new daily COVID-19 infections in the United States appears to be stabilizing around 55,000, and an unexpected rise in consumer prices last month appeared to boost confidence in the recovery.
On Thursday, US 10-year yields US10YT = RR regained a touchdown of 0.6638%, XAU = gold stabilized at $ 1,926 an ounce and the dollar came under pressure against the euro. [GOL/]
But the size and pace of stock market gains are starting to cause some concern. OCBC analysts at Singpore are concerned that a stress index they launched in April has only collapsed since its inception.
“Market stress… has dropped to such a low level that we are starting to wonder if we are missing anything,” wrote OCBC economist Wellian Wiranto.
“With that in mind, we are focusing on the US-China tensions that may start to take a more prominent place,” he said.
The next flashpoint is likely on Saturday, when senior officials meet to review the progress of the Phase 1 trade pact.
White House economic adviser Larry Kudlow said this week the deal was “very good so far,” comments that helped the yuan rise to a five-month high on Thursday in a sign of market confidence.
But China is lagging behind in agricultural and energy purchases and, Bloomberg News reported on Wednesday, is likely to raise other areas of the growing conflict between the two countries during trade talks.
Elsewhere, good humor kept the dollar under heavy pressure. [FRX/]
Markets are still eagerly awaiting a breakthrough in the wrangling over the next US stimulus package. Few signs of progress are unnecessary for the US economy and have helped the euro EUR = push back above $ 1.18 and the pound GBP = advance.
The Australian dollar AUD = edged up after better-than-expected employment figures – although unemployment topped 1 million for the first time capped gains. It was the last at $ 0.7171.
Australia was also the outlier in regional stock markets, with the sale of communications giant Telstra (TLS.AX) after a fall in profits that lags behind the index.
Korea’s Kospi .KS11 led gains in other markets outside of Japan, up 0.7% to a two-year high.
In commodities, oil mainly held on to solid overnight gains when a drop in crude inventories in the United States raised hopes that fuel demand would pick up. [O/R]
Brent LCOc1 futures were 0.2% lower at $ 45.33 per barrel, while US crude CLc1 fell by the same margin to $ 42.60 per barrel.
Weekly jobless claims in the US are on the horizon at 12:30 p.m. GMT and investors expect a modest downward trend to continue.
Report by Tom Westbrook in Singapore. Additional reporting by Lawrence Delevingne in Boston. Editing by Sam Holmes and Gerry Doyle
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