By Gina Lee
Investing.com – Asia Pacific stocks were up Tuesday morning amid growing optimism about the global economic recovery from COVID-19 and ahead of a two-day U.S. Federal Reserve meeting starting later in the day. U.S. counterparts rose to record heights during the previous session and U.S. Treasury yields moved downwards.
Japan’s Nikkei 225 gained 0.70% by 11:20 PM ET (3:20 AM GMT) and South Korea’s KOSPI was up 0.41%.
In Australia, the ASX 200 jumped 1.23%.
Hong Kong’s Hang Seng Index was up 0.39%. The city opened its COVID-19 inoculation program to a further 5.5 million people, including those 30 and above, with registration opening earlier in the day.
China’s Shanghai Composite edged up 0.15% and the Shenzhen Component edged up 0.14%.
The S&P 500 Index climbed for a fifth consecutive session, with utilities and real estate leading the week. Apple Inc (NASDAQ:AAPL)., Tesla (NASDAQ:TSLA) Inc., and Facebook Inc (NASDAQ:FB). also pushed the Nasdaq 100 Index higher, while contracts on the U.S. benchmarks remained little changed.
Australian ten-year bond yields dropped after benchmark ten-year U.S. Treasury rates also fell from the previous week’s highs.
Investors are now turning their attention to the Fed meeting and await its policy decision, due on Wednesday, where Fed Chairman Jerome Powell is widely expected to reaffirm his no-tightening policy stance. The Fed is also expected to give updated economic and interest rate projections alongside its policy decision.
One beneficiary, should the Fed maintain a hands-off approach to the recent spike in yields, is the reflation trade. With increased bets on faster global economic recovery from COVID-19 already pushing one market gauge of inflation to its highest level since 2008, a renewed climb in yields could drive a rotation from growth to value stocks.
“The stimulus package is a boon for the consumer, investors are expecting the consumer to come out and spend some of that pent-up demand,” Aviva (LON:AV) head of U.S. equities Susan Schmidt told Bloomberg.
Small-cap and even tech stocks will both benefit from the recovery. “Right now, in the market, we’re overshooting away from tech and sometimes we can go too far,” Schmidt added.
Other central banks due to hand down their policy decision later in the week are the Bank of England (BOE), whose decision comes Thursday, and the Bank of Japan’s decision comes a day later. BOE is widely expected to keep its current monetary policy unchanged as well.
Also on investors’ minds are a potential U.S. infrastructure spending package and the impact of potentially higher taxes on corporate profits.
On the COVID-19 front, fears of potential side effects have caused more European countries to suspend the rollout of the AstraZeneca PLC (LON:AZN)/University of Oxford COVID-19 vaccine. The suspensions are further delaying the continent’s inoculation drive.