Asian stocks cling to gains as Fed taper worries ease By Reuters

By Anshuman Daga

SINGAPORE (Reuters) – A bounce in China’s tech sector led Asian stocks higher on Tuesday and markets were also cheered by positive U.S. vaccination news and easing worries about an imminent tapering of stimulus by the Federal Reserve.

Nasdaq and both rose 0.15%, while European stocks markets were set for a strong opening, with up 0.19% and German gaining 0.16%.

The dollar was licking its wounds after its sharpest one- day fall since May, which spurred a 5% rally in oil prices on Monday.

Spiking COVID-19 infections caused by the highly contagious Delta variant have fuelled concerns about the recovery from the global health crisis.

“The market is hopeful that the Delta variant will prevent the Fed from doing anything too aggressively or too soon,” said Vasu Menon, senior investment strategist at OCBC Bank Wealth Management.

MSCI’s broadest index of Asia-Pacific shares outside Japan rallied 1.3%, with Japan and South Korean indexes jumping 1%. Australia shares were up 0.2% and Taiwan stocks rose 0.6%.

“Clearly, this tug of war will not end anytime soon. But the silver lining is that there is cautious optimism in the market and there’s also a lot of liquidity waiting on the sidelines,” said Menon.

Data overnight showed strong albeit slowing services and manufacturing activity in Europe while business activity growth in the United States slowed for a third straight month as the spread of the Delta virus variant took a toll.

Chinese markets advanced 1.1%, with technology stocks extending their recovery after enduring a pummelling in recent weeks on regulatory worries.

Wall Street’s strength underpinned sentiment in Asia. The Nasdaq closed at a record high on Monday after the U.S. Food and Drug Administration granted full approval to the COVID-19 vaccine developed by Pfizer (NYSE:) and BioNTech, a move that could accelerate inoculations in the United States.

Global markets took a beating last week on worries the Fed is edging closer to tapering its stimulus, with Asia’s main index tumbling 4.8% to be down 3% for the year. The improved sentiment overnight drove the dollar down more than 1% against its Australian and Canadian counterparts as well as the Norwegian crown and Swedish crown.

“A positive risk backdrop has pushed flows out of the dollar,” said Chris Weston, head of research at brokerage Pepperstone in Melbourne, adding that positive analyst commentary around oil and cyclical stocks had also helped the broad mood.

The dollar rose 0.1% against the yen to 109.79. The euro was down 0.0% on the day at $1.1741, having lost 1.1% in a month, while the , which tracks the greenback against a basket of currencies of other major trading partners, was up at 93.005.

Last week, the dollar index hit a nine-month high on bets the Fed would start shifting away from its accommodative monetary policy, but that view began to change on Friday when Dallas Fed President Robert Kaplan said he might reconsider his hawkish stance if the virus harms the economy. Now, investors are less confident Fed Chair Jerome Powell’s speech at Jackson Hole this week will indicate a timeline for winding down the Fed’s bond-buying program.

The yield on benchmark rose to 1.2684%. In commodities markets, futures added 0.4% to $69 a barrel after rallying more than 5% on Monday, as a weaker dollar and strong global equities markets boosted crude following seven sessions of declines. [O/R] Gold prices eased but stayed above the key psychological level of $1,800. [GOL/