Asian shares hit all-time highs, oil buoyant

SYDNEY – Asian shares advanced to record highs on Monday and oil rose to a more than one year peak as successful coronavirus vaccine rollouts globally raise hopes of a rapid economic recovery amid new fiscal aid from Washington.

MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 0.4% to 736.4.

Japan’s Nikkei climbed 1.3%, despite data showing the country’s recovery from its worst postwar recession slowed in the fourth quarter.

Australia’s benchmark index was up 1%.

E-mini futures for the S&P 500 were up 0.2% in early Asian trading. US stock markets will be closed on Monday for the Presidents Day holiday.

The highlight of the week will probably be minutes of the US Federal Reserve’s January meeting, where policymakers decided to leave rates unchanged.

Data on inflation is due from the UK, Canada, and Japan while Friday will see major economies including the United States release the preliminary February purchasing managers’ indices (PMI).

While economists expect inflation to stay benign for some while yet, the so called “reflation trade” has gathered steam in recent days largely led by coronavirus vaccines and hopes of massive fiscal spending under US President Joe Biden.

Biden pushed for the first major legislative achievement of his term, turning to a bipartisan group of local officials for help on his $1.9 trillion coronavirus relief plan.

“In our view, as long as the rise (in inflation) is gradual, equity markets can continue to do well. However, unruly moves would certainly hurt investor sentiment,” said Esty Dwek, head of global market strategy, Natixis Investment Managers Solutions.

“Credit spreads have tightened sharply already, but they still have room to absorb some higher yields, making us more comfortable with credit risk than interest rate risk,” Dwek added.

“Commodities would be beneficiaries of an inflationary cycle, but they can still continue to recover without high core inflation as economies reopen and demand picks up.”

Oil prices climbed to the highest since January 2020 on hopes US stimulus will boost the economy and fuel demand.

Brent crude rose 61 cents to $63.04 a barrel. US crude oil gained 83 cents to $60.03.

On Friday, the S&P 500 and Nasdaq set record closing highs. The Dow finished 0.1% higher at 31,458.4 points, the S&P 500 gained 0.5% to 3,934.83 and the Nasdaq added 0.5% to 14,095.47.

Action in currencies was muted.

The dollar was slightly higher against the Japanese yen at 105.07 while the euro was flat at $1.2119 and the British pound was up 0.1% at $1.3868. The risk sensitive Australian and New Zealand dollars were unchanged.

That left the dollar index steady at 90.426.

Bitcoin was barely changed in early Asian trading at $48,722, slightly below a record high of $49,000. It posted gains of roughly 20% in a milestone week marked by the endorsement of major firms such as Elon Musk’s Tesla. —Reuters