(ATF) Hong Kong: Asian markets added to their recent gains as investors eyed a post-pandemic world with vaccine rollouts gathering pace across the world and analysts upgrading their economic growth forecasts.
Safe-haven assets were subdued ahead of the US Federal Reserve’s two-day meeting as markets awaited the central bank’s views on the world’s biggest economy, inflation and bond purchases.
Japan’s Nikkei 225 index advanced 0.52%, Australia’s S&P ASX 200 added 0.80%, Hong Kong’s Hang Seng index moved up 0.67%, and China’s CSI300 rose 0.87%. Regionally, the MSCI Asia Pacific index climbed 0.63%.
US Treasuries were steady with the 10-year yield unchanged at 1.61%. The dollar retreated slightly from its recent peaks, trading at around 91.82 against a basket of currencies.
World benefits
“The Democrat sweep and President Biden’s announcement of a $1.9 trillion stimulus bill has led us to upgrade our forecast for US GDP growth with a knock-on effect to the rest of the world,” said Keith Wade, Chief Economist and Strategist at Schroders.
He now expects US GDP to increase 4.7% this year and 4.9% next, an upgrade of more than one percentage point for both periods.
“The rest of the world benefits through stronger trade and the impact is most noticeable in our 2022 global growth forecasts, which are raised from 4.1% to 4.6% as the world economy normalises,” Wade added.
The world’s second-largest economy is also expected to grow faster than earlier forecast after it released better-than-expected data on Monday.
“We upgrade China’s 2021 GDP growth forecast from 8.2% previously, to 9.0%, on stronger growth so far and better export demand going forward. We expect quarter-on-quarter growth momentum to pick up to more than 6% from Q2 onwards, ” said Tao Wang, Head of Asia economics and Chief China economist of UBS Global Research.
Index peak
Eyes are focused on the Fed’s two-day meeting, coming as it does in a month when the S&P500 hit an all-time peak and 10-year bond yields hit a one-year high.
“Focus has been on the FOMC ‘dot plot’ in recent days, but if the FOMC and Fed Chair (Jerome) Powell do not push back against current yield levels, investors are likely to take yields higher as better data arrives,” Steve Englander and John Davies, Standard Chartered strategists, wrote in a note.
“We expect a two-hike median for 2023 in the Fed Summary of Economic Projections by a narrow margin versus one hike, but not a 2022 hike,” they said while adding that money markets had priced in three increases by the end of 2023, with the first now implied as more likely than not by the end of 2022.
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Asia Stocks
- Japan’s Nikkei 225 index advanced 0.52%
- Australia’s S&P ASX 200 added 0.80%
- Hong Kong’s Hang Seng index moved up 0.67%
- China’s CSI300 rose 0.87%
- The MSCI Asia Pacific index climbed 0.63%.
Stock of the day
China Evergrande New Energy Vehicle Group shares rose as much as 11.6% after it announced a plan to jointly develop an industry-leading smart-vehicle operating system with technology giant Tencent.
