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Asian stocks set to firm on global recovery prospects

New York - Japan’s Nikkei 225 futures added 0.36% and Hong Kong’s Hang Seng index futures rose 0.68%.

Asian stocks were set for a strong open on Tuesday, helped mostly by global recovery prospects and the passage of a $1.9 US trillion stimulus bill, shaking off a mixed Wall Street session after a big downturn in tech shares.

US Treasury Secretary Janet Yellen said on Monday that President Joe Biden’s coronavirus aid package would provide enough resources to fuel a “very strong” US economic recovery, and noted “there are tools” to deal with inflation.

Despite the positive cues, investors remain conflicted over whether the stimulus will help global growth rebound faster from the Covid-19 downturn or cause the world’s biggest economy to overheat and lead to runaway inflation.

Although futures markets suggested a higher open across Asia, Michael McCarthy, chief markets strategist at CMC Markets, said there was still a lot of uncertainty.

“What’s going to determine the results today is the balance between buying for the reflation trade and the selling of tech (stocks)”, he said. “It’s difficult to say what’s going to be most influential given the spectacular gains across Europe compared to the big drop in the Nasdaq.”

The technology sector and other richly valued names have been highly susceptible to rising rates.

Australia’s benchmark S&P/ASX 200 index rose 0.92 per cent in early trading.

Japan’s Nikkei 225 futures added 0.36 per cent and Hong Kong’s Hang Seng index futures rose 0.68 per cent.

E-mini futures for the S&P 500 rose 0.55 per cent.

On Wall Street, the Dow advanced while the Nasdaq shed over 2 per cent. That marked a more than 10 per cent fall since its Feb. 12 closing high, confirming a correction in the index’s value.

The Dow Jones Industrial Average rose 0.97 per cent, the S&P 500 lost 0.54 per cent, and the Nasdaq Composite dropped 2.41 per cent.

The pan-European STOXX 600 index .STOXX rose 2.10 per cent and MSCI’s gauge of stocks across the globe shed 0.02 per cent.

“If rates are grinding higher because people are getting optimistic about what economic growth looks like, that is still supportive for equity prices,” said Tom Hainlin, global investment strategist at U.S. Bank Wealth Management’s Ascent Private Wealth Group in Minneapolis.

US treasury yields advanced as investors continued to price in higher inflation and more upbeat prospects for the US economy as it emerges from the coronavirus pandemic.

The benchmark 10-year yield rose to 1.6029 per cent, from 1.594 per cent late on Monday.

US economic data also pointed to a continued recovery, as the Commerce Department said wholesale inventories increased solidly in January despite a surge in sales, suggesting inventory investment could again contribute to growth in the first quarter.

On foreign exchange markets, the dollar index hit a three-and-a-half month high, rising rose 0.523 per cent, with the euro up 0.06 per cent to $1.185.

Oil prices settled lower, retreating from a session peak above $70 a barrel after attacks on oil facilities in Saudi Arabia lifted prices that high for the first time since the Covid-19 pandemic began.

US crude futures settled down $1.04, or 1.57 per cent, at $65.05 per barrel. Brent crude futures settled at $68.24 per barrel, down $1.12 or 1.61 per cent.

Spot gold added 0.2 per cent to $1,685.20 an ounce. US gold futures per cent to $1,677.70 an ounce.