Stocks gain, bonds calm as Fed outlook trumps Moody’s downgrade
Passersby are reflected on an electric stock quotation board outside a brokerage in Tokyo, Japan April 18, 2023. REUTERS/Issei Kato/File Photo
TOKYO – Stocks in Asia rose on Monday while Treasuries and the dollar kept their composure, as investors took their lead from Wall Street’s Friday rally, shrugging off a Moody’s downgrade to the U.S. credit outlook.
Tech stocks stood out, as they had in the U.S. at the end of last week, after the calming of long-term Treasury yields since the start of this month boosted the outlook for borrowing-dependent growth shares.
U.S. 10-year Treasury yields were stable at around 4.646 percent, consolidating around the top of their range since Nov. 3, when softer labor market data spurred bets for a less hawkish Federal Reserve. The yield had been as high as 4.935 percent on Nov. 1.
The U.S. dollar index hovered below its post-payrolls-report high of 106.01, reached on Friday, last trading little changed around 105.80.
Japan’s Nikkei rose 0.46 percent, with chip-related shares providing the biggest boost. Taiwan’s tech-heavy equity benchmark rallied 1.17 percent.
Hong Kong’s Hang Seng gained 0.49 percent amid an outperformance in tech shares.
However, mainland Chinese blue chips were slightly lower, and Australia’s resource-heavy benchmark slipped 0.13 percent.
Nomura Securities strategist Naka Matsuzawa said equities are likely close to a peak.
“Up until now the market has been taking bad economic news as good news, because that would mean a pause in Fed rate hikes,” he said.
READ: Big central banks hit pause, with rate cuts still far off
“But now, the Treasury market has already priced in a pause, so there’s not much room for Treasury yields to fall further,” removing a support for the stock market, he added. “In short, I don’t think the stock market rally is going to continue.”
The market paid little attention to a Moody’s announcement late on Friday that it had lowered its outlook on the U.S. credit rating to “negative” from “stable”.
The focus instead remains on upcoming economic data, with readings of U.S. consumer prices and retail sales due Tuesday and Wednesday, respectively.
Meanwhile, crude oil prices eased on Monday as demand worries trumped supply concerns, amid slowing growth in the United States and China.
READ: Oil prices ease on worries of waning demand in US and China
Brent crude futures for January were down 35 cents, or 0.4 percent, at $81.08 a barrel, while the U.S. West Texas Intermediate (WTI) crude futures for December were at $76.82, down 35 cents, or 0.5 percent.
Both benchmarks gained nearly 2 percent on Friday as Iraq voiced support for oil cuts by OPEC+.
