Asian Stocks Up, Investors Unwind Some Reflation Trades By


© Reuters.

By Gina Lee – Asia Pacific stocks were mostly up Friday morning, with investors unwinding some of the reflation trades that have marked 2021 to date.

Japan’s was up 0.31% by 10:22 PM ET (2:22 AM GMT), with the due to hand down its policy decision later in the day.

BOJ is widely expected to keep its massive stimulus firmly in place and could extend the deadline for its COVID-19-relief program in its decision. They both indicate that the country’s fragile economic recovery and tepid inflation mean any exit from the current ultra-easy policy remains a long way off.

Data released earlier in the day also said that Japan’s grew 0.1% year-on-year, in line with forecasts prepared by and higher than the 0.1% contraction recorded in April.

South Korea’s edged up 0.17% and in Australia, the was up 0.42%.

Hong Kong’s rose 0.76%.

China’s inched up 0.10% while the gained 0.69%. The voted 4 to 0 vote on Thursday to ban products from Huawei Technologies Co. and four other Chinese electronics companies.

U.S. shares saw little change, even as the latest cyclical stock rotation round pushed NASDAQ to another record. However, the benchmark was flat as the previous session ended.

Treasury yields steadied earlier in the session as investors were believed to be unwinding bets on a steeper curve. Yields tumbled on Thursday thanks to the U.S. Federal Reserve signaling that monetary-policy tightening could start sooner than previously thought in its handed down earlier in the week.

The central bank caught investors by surprise when it indicated that it was ready to begin discussing asset tapering earlier than expected in its decision. The Fed will also likely raise interest rates earlier than expected, with two hikes planned by the end of 2023.

Investors continued debating the timeline for when the Fed will start trimming its monthly bond purchase, but the decision did help to reduce recent concerns of hyperinflation.

Some investors remained positive.

“What we are seeing here is an interpretation that economic growth is improving and inflation is accelerating, historically both of those are positive for areas like the Nasdaq, tech stocks and even small caps,” Direxion managing director and head of product Dave Mazza told Bloomberg.

“Once we peel the onion a bit, what we are seeing in the data, all of this is generally positive for the economy,” he added.

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