Stocks across Asia kicked off the week with strong gains after soothing Federal Reserve comments and an easing of monetary policy in China triggered a renewed appetite for risk assets. Treasuries steadied after Friday’s slide and oil extended its recent rebound.
Shares in Japan, South Korea and Australia gained and futures pointed to advances for equities in China and Hong Kong. U.S. futures climbed, signaling Friday’s rally in U.S. stocks could continue. Federal Reserve Chairman Jerome Powell said policy is flexible and officials are “listening carefully” to financial markets, while the People’s Bank of China cut the required reserves for banks. Australian bond yields surged after the yield on 10-year Treasuries soared back to 2.67 percent on Friday. Sentiment may also be helped as the U.S. and China reopen trade talks.
“It’s probably an opportunity to buy the dips if you are underweight equity allocations,” Raymond Lee, managing director and portfolio manager at Kapstream Capital, said on Bloomberg TV. “I do think going forward you are probably not likely to see that type of move where equities sell off 20 percent in the space of six weeks, but generally volatility will be higher than what you saw in 2017 and the first half of 2018.”
Powell’s remarks are helping to lift sentiment that’s been hammered as global equities posted their biggest annual loss since the financial crisis, easing concerns the Fed is determined to raise rates even as global economic growth cools and markets tumble. Even after the slump in Treasuries at the end of last week, 10-year yields remain more than 50 basis points lower than where they peaked in November.
A further step by China’s central bank late Friday to secure liquidity to the slowing economy may also help assuage concerns. Apple Inc. last week cut its revenue outlook for the first time in almost two decades, citing weakness in China’s economy as one of the reasons. U.S. and Chinese officials will begin trade negotiations on Monday in the hope of reaching a deal during a 90-day truce between President Donald Trump and his counterpart Xi Jinping.
