Global stocks head for quarterly gain

Asian stocks rose with US and European equity futures yesterday as a gauge of global shares headed for a second-straight quarterly gain, underscoring investor optimism in the face of banking turmoil and elevated interest rates.

Technology shares led global stocks this quarter, surging 19%, the most since mid-2020. The upbeat tone has been on display this week, with the S&P 500 climbing 0.6% Thursday in its third advance in four days. The Nasdaq 100 rose 0.9% overnight, pushing further into a bull market.

Benchmark indexes climbed in Hong Kong, Japan and Australia yesterday as they also rallied towards quarterly gains. The Topix index slightly pared its gains after Japan announced it would impose new restrictions on chip exports.

The dollar, which has weakened this month, was little changed yesterday against most major peers. It rose about 0.3% versus the yen.

Treasuries were little changed in early Asian trading after a tumultuous period. There have been wild swings in yields this year as investors struggled to adjust for banking collapses and the shifting outlook for interest rates amid high inflation and threats to economic growth.

The two-year yield was around 4.13% yesterday while the 10-year maturity was about 3.56%.

The gains Thursday in US stocks came as market watchers digested a round of Fed commentary suggesting more monetary tightening was necessary, even after the collapse of three US banks earlier this month.

Boston Fed President Susan Collins said tightening was needed, while Richmond Fed President Thomas Barkin said the Fed can raise rates more if inflation risks persist.

Positive signals out of China are helping the Bloomberg Commodity Index pare its quarterly loss, with oil recovering half of the ground it lost since early March. Most market watchers are still betting on China’s recovery underpinning a price rally later this year.

That optimism is also apparent in Chinese equities. Alibaba Group Holding Ltd’s logistics arm Cainiao Network Technology Co — currently valued at more than $20 billion — has started preparations with banks for its Hong Kong initial public offering. Meanwhile, shares in rival JD.com soared in the US after two of its subsidiaries filed for IPOs in Hong Kong.

“The fact these companies are embarking on value unlocking, you would speculate that maybe these companies have the support of Beijing,” Chetan Seth, Asia-Pacific equity strategist at Nomura Holdings Inc, said on Bloomberg Television. “This was not the case six months ago. So I would say very good for China equities.”

Meanwhile, China managed to keep the momentum in its economic recovery after an official gauge of manufacturing only fell slightly to 51.9 in March from 52.6 in February. The March figure was higher than the median economist estimate.

Traders were still on guard for any choppiness amid quarter-end rebalancing from pension funds and options hedging activity. And they continue to debate the extent to which policymakers may cut interest rates this year.

“You have to assume now that the game has changed and that the Fed is gonna be more moderate,” Rick Rieder, chief investment officer of global fixed income at BlackRock Inc, said on Bloomberg Television. “We’re at levels today that are very restrictive.”

Still, several strategists have said markets are wrong to expect cuts by the Fed this year, as the labour market remains robust, though US unemployment claims ticked up for the first time in three weeks. High inflation — as measured by the so-called PCE Core Deflator due yesterday — is expected to have persisted last month.

Back in Asia, FTSE Russell will keep South Korea on the watch list for inclusion to its global bond index — and India for the emerging-market equivalent — prolonging the countries’ wait to get into key market gauges.

Elsewhere, oil traded near a twoweek high. Gold was little changed yesterday, but headed for the biggest monthly gain since July 2020.