Asian shares rise as Nasdaq record close lifts sentiment; Treasury yields high
Asian shares rose on Tuesday, tracking a technology-led rally that lifted the Nasdaq to a record close, while a retreat in oil prices offered support and longer-dated US Treasury yields held near multi-decade highs. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2%, Japan's Nikkei gained 0.7% and European stock futures climbed 0.5%. Nasdaq futures edged up 0.2% and S&P 500 futures rose 0.1%.
The Nasdaq's record close came after softer-than-expected jobs data dampened expectations for a Federal Reserve rate rise this month. Nvidia, described in the report as an AI heavyweight, climbed 2.1% to a record-high close and a market value of $5.76 trillion. Kyle Rodda said the rally in the market was tech led once again, with the marginal easing of interest rate uncertainty along with a slight moderation in geopolitical risk allowing market participants to focus on the extraordinary earnings growth being delivered by AI names. The third-quarter earnings season kicks off next week. Goldman Sachs estimated that consensus forecasts point to 27% growth in S&P 500 earnings last quarter, with more than half of that growth coming from companies benefiting from AI infrastructure spending.
The climb in Treasury yields continued even as markets scaled back the probability of a Fed rate rise this month to 23% from 71% a week earlier, after senior policymakers stressed the need for more data before tightening again. US 10- and 30-year yields hit fresh 24-year highs overnight. The 10-year was steady in Asia at 5.3089% after reaching 5.3493%, its highest since 2002, while the 30-year held at 5.6622% after briefly touching 5.7029%. An ISM survey showed a measure of prices paid by services businesses for inputs jumped to its highest level in more than four years.
The euro languished near 17-month lows, standing at $1.1215 after falling as much as 0.8% to $1.116 overnight, and traded at 177 yen after seven straight sessions of declines. Investors sold French government bonds following an underwhelming budget, though the premium demanded to hold French 10-year debt over safer German bunds narrowed to 137 basis points on Monday. Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, said deep divisions in France's parliament raised the risk that the proposed fiscal consolidation would be diluted or that the government would face a no-confidence vote, and that EUR/USD would likely test support at 1.1109. Political uncertainty deepened further after Spanish Prime Minister Pedro Sanchez called a snap election.
Brent crude was little changed at $100 a barrel after losing 1.9% overnight as exports from the Middle East increased and the Group of Seven nations pledged to boost supplies. Spot gold was little changed at $4,141.31 an ounce, and the dollar index stood at 102.2 after a weekly rise of 0.9%. Latin American markets also advanced, led by a rally in Brazilian stocks and the real, after right-wing Senator Flavio Bolsonaro outperformed poll predictions in the first round of the presidential election and advanced to a runoff against leftist incumbent Luiz Inacio Lula da Silva.
