Asian stocks rise on ease in growth fears

Asian markets: Shares advanced in Japan, South Korea and Australia

Stocks in Asia caught a modest tailwind Friday from a US rally sparked by hopes that policy makers can get inflation under control without causing a global economic downturn.

Shares advanced in Japan, South Korea and Australia. US equity futures edged down after the best Wall Street session in two weeks swept along everything from speculative investments to technology titans.

Two of the Federal Reserve’s most hawkish policy makers pushed back against fears of a recession as monetary settings tighten. Governor Christopher Waller and St. Louis Fed President James Bullard backed the need for restrictive policy to curb price pressures but argued the US can still avert a contraction.

The possibility of 1.5 trillion yuan ($220 billion) of stimulus in China to shore up growth also injected a dash of optimism, supporting commodities including metals and oil, which held above $102 a barrel. 

Separately, President Joe Biden will discuss possible reductions in US tariffs on Chinese goods in a meeting with his advisers Friday, a development that could help investor sentiment too.

A dollar gauge stayed lower and Treasuries fell, leaving the US 10-year yield at about 3%. Bitcoin scaled $21,000 for the first time this month.

As ever in a year of marked volatility and steep losses, the question is whether the tilt in market narrative away from recession fears toward the fabled soft landing is anything more than temporary.

“I’m calling this period right now a recession obsession," Brian Belski, chief investment strategist at BMO Capital Markets Corp., said on Bloomberg Television. “Institutional investors are not positioned for any kind of upside move. That’s why you are seeing these sharp moves on a day like today and certainly over the last few days in terms of a short squeeze. We remain positive and think people are way too negative."

Portions of the US yield curve remain inverted, which for some is a sign that the threat of recession is elevated. High bond volatility also points to great uncertainty. All eyes will be on the US jobs report on Friday for further clues about the Fed’s policy path.

Elsewhere, the pound rose after Boris Johnson announced his intention to resign as British prime minister, easing the political chaos in the UK.

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What to watch this week:

US employment report for June, Friday
Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.2% as of 9:26 a.m. in Tokyo. The S&P 500 rose 1.5%
Nasdaq 100 futures fell 0.3%. The Nasdaq 100 rose 2.2%
Japan’s Topix index rose 0.1%
Australia’s S&P/ASX 200 index advanced 0.6%
South Korea’s Kospi index climbed 0.8%

Currencies

The Bloomberg Dollar Spot Index was steady
The euro was at $1.0166
The Japanese yen was at 136.00 per dollar
The offshore yuan was at 6.6925 per dollar

Bonds

The yield on 10-year Treasuries advanced one basis point to 3.01%
Australia’s 10-year bond yield rose four basis points to 3.51%

Commodities

West Texas Intermediate crude was at $102.50 a barrel, down 0.2%
Gold was at $1,743.41 an ounce.

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