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GLOBAL MARKETS-Asia stocks hold at highs, sustained by bottomless stimulus

Published 02/11/2021, 12:25 PM
Updated 02/11/2021, 12:30 PM
© Reuters.
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* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Markets mostly flat amid multiple holidays
* Asia shares ex-Japan already up 10% this year
* Treasuries rally on surprisingly soft CPI, dovish Powell
* Oil eases after longest winning streak in two years

By Wayne Cole
SYDNEY, Feb 11 (Reuters) - Asian shares rested at record
highs on Thursday as investors digested recent meaty gains,
while bulls were sustained by the promise of endless free money
after a benign reading on U.S. inflation and a dovish Federal
Reserve outlook.
Adding to the torpor was a lack of liquidity as markets in
China, Japan, South Korea and Taiwan were all on holiday.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS added 0.1%, having already climbed for four
sessions to be up over 10% so far this year.
Japan's Nikkei .N225 was shut after ending at a 30-year
peak on Wednesday, while Australia's main index .AXJO held
near an 11-month top.
With China off, there was little reaction to news the Biden
administration will look at adding "new targeted restrictions"
on certain sensitive technology exports to the Asian giant and
would maintain tariffs for now. Futures for the S&P 500 ESc1 and NASDAQ NQc1 were both
steady, having hit historic highs on Wednesday. EUROSTOXX 50
futures STXEc1 and FTSE futures FFIc1 barely budged.
Still, the outlook for more global stimulus got a major
boost overnight from a surprisingly soft reading on core U.S.
inflation, which eased to 1.4% in January. Federal Reserve Chair Jerome Powell said he wanted to see
inflation reach 2% or more before even thinking of tapering the
bank's super-easy policies. Notably, Powell emphasised that once pandemic effects were
stripped out, unemployment was nearer 10% than the reported 6.3%
and thus a long way from full employment.
As a result, Powell called for a "society-wide commitment"
to reducing unemployment, which analysts saw as strong support
for President Joe Biden $1.9 trillion stimulus package.
Indeed, Westpac economist Elliot Clarke estimated over $5
trillion in cumulative stimulus, worth 23% of GDP, would be
required to repair the damage done by the pandemic.
"Historical experience provides strong justification to only
act against undesired inflationary pressures once they have been
seen, after full employment has been achieved," he said.
"To that end, financial conditions are expected to remain
highly supportive of the U.S. economy and global financial
markets in 2021, and likely through 2022."
The mix of bottomless Fed funds and a tame inflation report
was a salve for bond market pains, leaving 10-year yields at
1.12% US10YT=RR from a 1.20% high early in the week.
That in turn weighed on the U.S. dollar, which slipped to
90.395 =USD on a basket of currencies and away from a 10-week
top of 91.600 touched late last week.
The dollar eased to 104.57 yen JPY= , from a recent peak of
105.76, while the euro rallied to $1.2122 EUR= from its low of
$1.1950.
In commodity markets, gold was sidelined at $1,838 an ounce
XAU= as investors drove platinum XPT= to a six-year peak on
bets of more demand from the automobile sector. GOL/
Oil prices took a breather, having enjoyed the longest
winning streak in two years amid producer supply cuts and hopes
vaccine rollouts will drive a recovery in demand. O/R
"The current price levels are healthier than the actual
market and entirely reliant on supply cuts, as demand still
needs to recover," cautioned Bjornar Tonhaugen of Rystad Energy.
Brent crude LCOc1 futures eased back 40 cents to $61.07,
while U.S. crude CLc1 dipped 36 cents to $58.32 a barrel.


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Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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