Asia Stocks Set to Rise as Treasury Rally Eases

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(March 27): Asian stocks were poised for modest gains after U.S. equities rallied and Treasuries declined amid signs concerns over the economic slowdown were abating. The dollar rose.

Futures indicated gains for shares in Japan, Hong Kong and Australia, suggesting the regional rebound that saw the Topix index recoup all of Monday’s slide has further to go. Energy shares led gains in the S&P 500 Index on Tuesday as oil surged after Russia signaled commitment to output cuts. The yield on benchmark U.S. bonds increased after a two-day plunge, though the spread between three-month and 10-year rates remained in negative territory. The yen held losses.

Markets are steadying as investors speculate the slide in equities that began Friday in the U.S. was overdone. On the one hand the inversion of three-month and 10-year rates serves as a recession warning, while lower yields improve the relative attractiveness of equities.

“We significantly revalued equities, dropped the competitive pressure on yields, and we took away inflation overheat pressure,” Jim Paulsen, chief investment strategist at Leuthold Weeden Capital Management LLC, told Bloomberg TV. “Now we’ve created great fear and a wall of worry to climb again, about recession fear and bear-market risk. I like that combination for higher markets.”

The outcome of U.S.-China trade talks and any developments in Britain’s tortuous exit from the European Union could help determine sentiment from here. The pound earlier edged higher as a Brexit hardliner indicated he’s willing to back Theresa May’s deal, a move that could be a game-changer if others follow suit.

Here are some key events coming up:

U.S.-China trade talks resume, with a cabinet-level American delegation due in China. U.K. Parliament is set to stage several key votes on Brexit on Wednesday. Fed Governor Randal Quarles will speak Friday to the Shadow Open Market Committee on “Strategic Approaches to the Fed’s Balance Sheet and Communications.”

These are the main moves in markets:

Stocks

Futures on Japan’s Nikkei 225 rose 0.6 percent in Singapore. Hang Seng Index futures added 0.3 percent. Futures on Australia’s S&P/ASX 200 Index gained 0.2 percent. The S&P 500 gained 0.7 percent.

Currencies

The yen held at 110.61 per dollar after a 0.6 percent fall the prior session. The offshore yuan was steady at 6.7233 per dollar. The Bloomberg Dollar Spot Index added 0.2 percent Tuesday. The euro bought $1.1268, little changed. The British pound slipped 0.1 percent to $1.3206.

Bonds

The yield on 10-year Treasuries climbed two basis points to 2.42 percent. Australia’s 10-year yield held at 1.82 percent after rising four basis points Tuesday.

Commodities

West Texas Intermediate crude surged 1.9 percent to $59.94 a barrel. Gold held at $1,315.59 an ounce. - Bloomberg