Most Asian stocks rose on Monday after the outcome of Japan’s election bolstered expectations for fiscal stimulus and as all-time highs for US shares encouraged some investor optimism. The yen weakened.

Equities jumped almost 2% in Japan, where Prime Minister Fumio Kishida’s Liberal Democratic Party defied forecasts by preserving its outright majority.

Stocks fluctuated in China amid data signalling economic weakness due to power shortages, surging commodity prices and Covid-19 curbs.

US and European futures advanced after Friday records for the S&P 500 and Nasdaq 100.

The US 10-year Treasury note edged down and the gap between five-year and 30-yields shrank. Short-term yields from Canada to Australia have jumped on bets that monetary authorities must hike interest rates to curb inflation.

Traders are awaiting central bank meetings in the US, UK and Australia this week. The Federal Reserve is expected to scale back bond purchases.

A gauge of the dollar ticked up. In Australia, sovereign debt pared an epic Friday collapse. The rout was triggered by the central bank’s failure to defend a bond-yield target, spurring speculation of a looming policy shift. 

Fixed-income market upheavals suggest investors anticipate a slowdown in the recovery from the pandemic as price pressures lead central banks to reduce economic support. Supply-chain disruptions and an energy squeeze are fuelling jumps in the cost of living. Global shares have so far shrugged off such risks and remain close to all-time peaks, supported by company earnings.

“Depending on where you are looking, you are getting very different stories on the outlook for global markets,” Kerry Craig, global market strategist at JPMorgan Asset Management, said. “If you look at equities and the rally you are seeing, you think everything is OK. If you look at the bond market and how yields are moving, there’s obviously a lot more concern around inflation and policy normalisation.”

While China’s purchasing managers’ indexes pointed to weakness, other gauges indicated manufacturing activity elsewhere in Asia firmed last month.

The stress in China’s property sector also remains in focus. At least four developers defaulted on bonds last month. China Evergrande Group twice averted that fate by paying overdue coupons at the 11th hour. Chinese dollar high-yield notes dipped.

Meanwhile, crude oil wavered as pressure mounts on Opec+ to boost production when it meets on Thursday. Recent weakness in crude is a short-term pull back in an “otherwise intact bull market”, Goldman Sachs Group analysts wrote in a note, reaffirming a year-end Brent target of $90 a barrel.

Bloomberg News. More stories like this are available on bloomberg.com


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