US infrastructure deal boosts Asian markets

Shanghai — Asian shares rose on Friday, tracking gains on Wall Street overnight that lifted the Nasdaq and the S&P 500 indices to record highs after US President Joe Biden embraced a bipartisan Senate infrastructure deal.

Investors have been looking to an infrastructure agreement to extend the recovery in the world’s largest economy after huge fiscal stimulus helped the US economy grow at a 6.4% annualised rate in the first quarter.

In morning trade, MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.58%.

“The positive market tone recognises the potential growth benefits of the compromise, but with the smaller size tempering some of the tax implications to pay for it,” said Kerry Craig, global market strategist at JPMorgan Asset Management.

Securing bipartisan agreement on the deal required Biden to sacrifice some of his original ambitions on schools, climate change mitigation, and support for parents and caregivers, as well as tax increases on the rich and corporations.

“We continue to expect progress on further fiscal stimulus in the months to come and the larger size of those packages will likely necessitate rising taxes, especially if they come via the US Congressional budget reconciliation process rather than partisan support,” said Craig.

Chinese blue-chips rose 0.43%, Hong Kong’s Hang Seng added 0.61%, Seoul’s Kospi was up 0.79% and Australian shares climbed 0.22%. Japan’s Nikkei rose 0.59%.

Asian stocks rebounded after falling earlier in the week amid concerns of earlier-than-expected policy tightening by the US Federal Reserve, after it signalled higher rates in 2023 last week.

“The reality remains that the timing of any tapering scare, or indeed tapering, is most likely to be driven by market-driven inflation expectations. And the pressure on this front has eased of late,” Christopher Wood, global head of equity strategy at Jefferies, said in a note.

Overnight, the S&P 500 gained 0.58% and the Nasdaq Composite added 0.69%, lifting both indices to record high closes. The Dow Jones Industrial Average rose 0.95%.

In the currency market, the dollar index was down about 0.1% at 91.762 as investors continued to mull over the likelihood of Fed tightening in the face of persistent inflation.

The Japanese yen was slightly weaker at 110.90 and the euro edged up 0.08% to $1.1940.

Benchmark 10-year US Treasuries, which saw yields dip after Biden’s announcement of an infrastructure bill were last at 1.497%, up from a close of 1.487% on Thursday.

Yields on the 30-year bond rose to 2.1062% from 2.095% on Thursday.

Oil prices climbed to near three-year highs, supported by drawdowns in US inventories and accelerating German economic activity, with US West Texas Intermediate crude rising 0.29% to $73.51 per barrel and global benchmark Brent crude at $75.77, up 0.28% on the day.

Spot gold was up 0.11% at $1,777.07/oz.

Reuters