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Picture: BLOOMBERG/AMIR HAMJA
Picture: BLOOMBERG/AMIR HAMJA

Tokyo — Stocks gained in Asia on Monday amid improved risk sentiment after Wall Street rebounded strongly at the end of last week as oil prices eased, tempering fears of prolonged inflation and the accompanying aggressive Federal Reserve tightening.

Treasury yields remained subdued and the dollar hovered near the lowest in more than a week as investors continued to assess the outlook for US rate hikes and the potential for a recession.

Japan's Nikkei rallied 1.04%, while Australia's benchmark jumped 1.69%.

Chinese blue chips rose 0.54% and Hong Kong's hang seng advanced 1.46%.

South Korea's kospi gained 1.65%.

MSCI's broadest index of Asia-Pacific shares rose 1.31%.

However, US stock futures point to a 0.25% decline when those markets reopen. On Friday, the S&P 500 surged more than 3%, adding to an almost 1% gain on Thursday.

“We've had a decent end to the week in the US markets and I think that's going to be the main scene for Monday here in Asia,” amid a dearth of news or other new drivers, said Rob Carnell, chief economist for Asia-Pacific at ING.

“We've had two decent equity days on the run now. It's perhaps notable that you've had some consistency there.”

Crude oil fell in volatile trading on Monday as the market grapples with concerns that a global economic slowdown could depress demand vs worries about lost Russian supply amid sanctions over the Ukraine conflict.

Brent and US West Texas Intermediate (WTI) futures fell more than a dollar earlier. But, prices have rebounded with Brent at $112.78 a barrel, down 34c, and WTI at $107.17, down 45c.

US long-term Treasury yields hovered around 3.13% after bouncing off a two-week low just above 3% at the end of last week as traders removed bets for hikes next year, but still pondered if aggressive tightening this year could trigger a recession.

Yields have dropped from 3.456%, the highest in more than a decade, reached before the mid-month Fed meeting. Then, the central bank hiked rates by 75 basis points, the biggest increase since 1994, and signalled that a similar move is possible in July.

“The market remains focused in the trade-off between the policy response to high inflation and fears of a hard landing,” Westpac rates strategist Damien McColough wrote in a client note.

“There will be ongoing discussions as to whether long-end yields have peaked, however we would not yet expect 10-year yields to fall materially or sustainably below 3%.”

The dollar was steady on Monday, continuing to consolidate near the lowest since the middle of the month against major peers.

The dollar index, which measures the currency vs six rivals, was little changed at 104.01, after gradually gravitating over the past few sessions towards the June 17 low of 103.83.

Gold ticked 0.32% higher to $1,832.10 per ounce.

Reuters

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