Asia Stocks to Track U.S. Rally as Traders Buy Dip: Markets Wrap

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(Bloomberg) — Asian stocks look set to snap three days of losses after bargain hunters drove U.S. equities to the biggest advance since March as anxiety over the economic impact of coronavirus flareups eased. Treasury yields rose.

Futures climbed Wednesday in Japan, Australia and Hong Kong. The S&P 500 almost erased Monday’s slide in a comeback for the reopening trade led by cyclical sectors such as industrials and financials, while a gauge of small caps jumped 3%. U.S. contracts fluctuated in early Asian trading.

A rally in Treasuries paused, sending 10-year yields back above 1.2%. It remains to be seen if the recovery in yields has legs amid lingering concerns about the delta virus variant that led traders to pare back bets on Federal Reserve rate hike.

The dollar edged higher against major peers in U.S. hours, advancing for a fourth day. Oil pared gains and Bitcoin held below the $30,000 level.

Spiking cases of the more contagious delta strain and curbs to fight infections in a range of nations spooked investors this week. But loose U.S. monetary policy, still-high levels of economic expansion and robust corporate earnings growth remain powerful props for sentiment, encouraging retail investors to buy dips in equities.

“Pretty amazing rebound, really,” said JJ Kinahan, chief market strategist at TD Ameritrade. “That buy-the-dip mentality has played well. It’s like a football coach that runs the same play that keeps working. There’s no reason to change that play. It’s certainly working again.”

On the economic front, data showed U.S. housing starts increased in June by more than forecast, suggesting residential construction is stabilizing despite lingering supply-chain constraints and labor shortages.

For more market commentary, follow the MLIV blog.

Some key events to watch this week:

European Central Bank rate decision ThursdayBank Indonesia rate decision ThursdayU.S. existing home sales ThursdayThe Tokyo Summer Olympics begin Friday

Here are some of the main market moves:

Stocks

S&P 500 futures rose 0.1% as of 7 a.m. in Tokyo. The S&P 500 rose 1.5%Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 1.2%Nikkei 225 futures rose 1%Australia’s S&P/ASX 200 Index futures gained 0.7%Hang Seng Index futures added 0.2%

Currencies

The Japanese yen was at 109.87 per dollarThe offshore yuan traded at 6.4884 per dollarThe Bloomberg Dollar Spot Index rose 0.1%The euro was at $1.1782

Bonds

The yield on 10-year Treasuries advanced three basis points to 1.22%

Commodities

West Texas Intermediate crude was at $66.63 a barrel, down 0.9%Gold was little changed at $1,810.65 an ounce

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