Tom Westbrook
SINGAPORE (Reuters) – Asian shares posted their biggest gain in a month on Thursday, while the dollar took a breather and bond markets stabilized as investors pulled back to assess the outlook for interest rates.
Oil found support after its sharpest fall in two-and-a-half months on demand concerns and the lack of an obvious Israeli or US response to Iran’s attack on Israel over the weekend.
Analysts do not expect new drastic sanctions on Iranian oil, which accounts for about 3% of global production.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1%, helped by a 2% rise in South Korea’s Kospi and a 1% rise in Hong Kong. All these indices are still declining over the week and over the month.
rose 0.3%, although the 3.6% drop for the week marks the biggest weekly drop since 2022.
rebounded 0.4%, rose 0.5%, rose 0.3%, while European futures remained unchanged.
The dollar has fallen from recent highs and news of an unusual trilateral agreement between the US, Japan and Korea to closely consult on currency matters has left the door open for intervention to slow any further dollar gains in Asia.
Expectations for short-term U.S. interest rates were little changed, but sales of longer-term bonds eased and Asian bond markets rose on Thursday. Japanese 10-year government bond yields fell 2 basis points to 0.86%.
The 10-year Treasury yield fell 1.6 bps. to 4.569% and the two-year Treasury yield, which hit 5% on Thursday, was last at 4.92%.
“I think (the fall in yields and the dollar) is a small pullback from longer moves,” said Anshul Sidher, global head of markets at ANZ in Singapore, adding that traders were keeping a close eye on bonds and the dollar to lift sentiment.
“I expect the oil price situation to be capped depending on the escalation of the situation in the Middle East compared to where we are now,” he said.
Taiwanese chipmaker TSMC delivered a positive surprise, beating market forecasts with a 9% increase in profit on a wave of demand driven by artificial intelligence. The company expects business to pick up in the second half, a result that contrasts with Wednesday’s disappointing earnings from chip supplier ASML (AS:).
DOLLAR PAUSE
The jitters in stock markets followed a wave of bond selling and dollar buying as persistent US inflation and a change in tone from the Federal Reserve pointed to persistently high US rates. The interest rate-sensitive Nasdaq index fell 3% this week.
The euro is under pressure as European policymakers prepare to cut rates in two months, although at $1.0680 it is below this week’s five-month low.
The Australian dollar suffered slightly from data showing an unexpected fall in Australian employment in March, before stabilizing at $0.6446.
The yen is trading at 154.32 per dollar, near three-decade lows, and traders are eyeing a break above 155 as a possible trigger for intervention. [FRX/]
“China will likely welcome an end to the yen devaluation,” Bank of Singapore strategist Moh Siong Sim said in a note to clients.
“We believe the question of whether Japan will intervene to limit the yen’s weakness will have implications for the PBOC’s assessment of the appropriate level to stabilize (the yuan).”
fluctuated at 7.2357 per dollar. It is down 1.8% against the dollar this year, and the weakening of its trading band this week was seen as a signal that Chinese authorities will tolerate further accommodativeness. [CNY/]
In other commodity markets, European gas prices retreated from three-month highs, and the sharp rise in metals prices paused but did not reverse.
Three-month London futures are up 12% this year to trade at $9.584 a tonne overnight. Singapore iron ore posted a profit of just over $110 per tonne. [MET/L]
Gold is just below last week’s record high of $2.376 an ounce. [GOL/]
Several U.S. and European central bank officials will speak later on Thursday. US unemployment claims data will be released, and earnings from Blackstone (NYSE:) and Netflix (NASDAQ:) will be closely watched.