Asian shares extend global recovery as volatility subsides

ASIAN SHARES gained on Monday, joining a global recovery for equity markets as sentiment improved gradually from a recent shakeout that was sparked by fears of creeping inflation and higher borrowing costs. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5%, having recovered more than 40% of its losses from late January to last week’s low. Japan’s Nikkei gained 2.0% while US stock futures climbed gained 0.4% in Asia on Monday.

TOKYO — Asian shares gained on Monday, joining a global recovery for equity markets as sentiment improved gradually from a recent shakeout that was sparked by fears of creeping inflation and higher borrowing costs.

MSCI’s broadest index of AsiaPacific shares outside Japan rose 0.50%, having recovered more than 40% of its losses from late January to last week’s low.

Japan’s Nikkei gained 2% while US stock futures climbed gained 0.40% in Asia on Monday.

European share are also seen rising, with spread- betters expecting advances of up to 0.80% in Germany’s Dax, 0.50% in France’s Cac and 0.20% in Britain’s FTSE.

MSCI’s index of stock markets across the globe gained 4.3% last week, the best weekly performance since December 2011.

The rebound came after a twoweek rout that wiped off more than 10% of value at one point, triggered by worries a rise in US inflation may boost dollar funding costs.

The sell- off took place even as the corporate earning outlook improved on the back of strong global growth, bringing down equity valuations off highs hit earlier this year.

Just before the market ructions in late January, world shares were traded at 16.66 times their expected earnings, the highest levels since 2004, according to Thomson Reuters Datastream. They are currently at 15.33 times.

“The stocks’ valuation has become cheaper to levels that are on par with the assumption that long- term US bond yields will shoot up to 3.15-3.20%,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

The US 10- year Treasuries yield rose to a four-year high of 2.944% last week, compared to 2.411% at the end of last year.

The two- year US yield last week hit its highest level since 2008 as investors bet that the Federal Reserve will raise interest rates at its next policy meeting in March.

“What’s been told less about rising US yields is the fact that this could reflect the impact of the Fed’s balance sheet reduction and the likely increase in US debt issues following Trump’s tax cuts and infrastructure spending,” said Hiroaki Hayashi, director of Fukokushinrai Life Insurance.

“The 10- year US Treasuries could test the 3% level.” —