Asian markets soar at record highs on global recovery hopes

Asian shares vaulted to record highs on Friday and Japan’s Nikkei hit a three-decade peak as investors looked beyond rising coronavirus cases and political unrest in the United States to focus on hopes for an economic recovery later in the year.

European share markets were set to follow Asia higher, with pan-region Euro Stoxx 50 futures up 0.77%, German DAX futures up 0.83% and FTSE futures up 0.46%.

US S&P 500 e-mini stock futures also pointed to a cheery open on Friday, rising 0.51% to 3,815.

The upbeat mood came after Wall Street hit record highs on Thursday while bond prices fell as markets bet a new Democratic-controlled US government would lead to heavy spending and borrowing to support the country’s economic recovery.

“Market participants are fairly optimistic with how things are progressing, whether it’s in the political landscape, particularly of course in the United States the potential for more stimulus certainly is a boon to the economy,” said James Tao, analyst at CommSec in Sydney.

“You’ve got the vaccines now coming through, getting the approvals - it’s all happening pretty quickly,” he added.

The buoyant mood lifted MSCI’s broadest index of Asia-Pacific shares outside Japan up 1.56%, touching a record high.

Seoul’s Kospi led the way, charging 4% higher, also to a record high. In Tokyo, the Nikkei added 2.36%, hitting its highest level since August 1990. The dollar-denominated Nikkei share average rose above its 1989 peak to a record high.

Hong Kong’s Hang Seng rose 1.05% despite reports the Trump administration was considering banning U.S. entities from investing in an expanded list of Chinese companies in the waning days of the presidency, and despite the removal of major Chinese telecoms firms from FTSE Russell and MSCI indexes.

Chinese blue-chip shares pulled back 0.7% as investors booked profits after the index finished at a 13-year high a day earlier.

On Thursday, the Dow Jones Industrial Average rose 0.69%, the S&P 500 gained 1.48% and the Nasdaq Composite added 2.56% - with all three indexes finishing at record closing highs.

The gains follow expectations that Democratic control of both US houses of Congress will help the party of President-elect Joe Biden push through larger fiscal stimulus and comes despite political unrest in Washington, DC.

US government officials have begun weighing removing President Donald Trump from office before Biden’s inauguration date of Jan. 20, after Trump supporters stormed the US Capitol building.

Rising risk appetite weighed on bonds, pushing benchmark U.S. yields higher. Ten-year notes yielded 1.1% on Friday, up from 1.017% on Thursday. The 30-year bond yielded 1.8768%, up from 1.845% Thursday.

The dollar held onto its gains helped by the rising yields. The dollar index edged up against a basket of currencies to 89.836 with the euro down 0.07% to $1.2262. The greenback was up by 0.1% against the yen to 103.90.

“We’re sure to see a synchronised global recovery in the second half of this year,” said ING analyst Carsten Brzeski.

“Right now, there’s lots of concern about the virus and noise surrounding the vaccine. But we need to take a slightly longer view.”

Cryptocurrency bitcoin traded down about 2.6% at $38,486 after topping $40,000 for the first time on Thursday on high demand from institutional and retail investors. Market watchers have said a pullback is likely following its recent run-up.

In commodity markets, oil traders continued to focus on Saudi Arabia’s pledge to deepen production cuts.

Oil prices hit 11-month highs and were on track for a weekly gain on Friday, supported by Saudi Arabia’s pledge to cut output and a global stocks rally as investors looked beyond rising coronavirus cases.

Brent crude climbed 83 cents, or 1.5%, to $55.21 a barrel by 1202 GMT, the highest since late February, and US West Texas Intermediate (WTI) gained 66 cents, or 1.3%, to $51.49, also its highest level since late February.

Both were on track for weekly gains of more than 6%.

“The surprise Saudi cut is keeping bulls at the helm,” said Stephen Brennock of oil broker PVM. “It will take a brave man to bet against the current bullish run of play.”

Saudi Arabia this week pledged extra, voluntary oil output cuts of one million barrels per day (bpd) in February and March as part of a deal under which most Opec+ producers will hold production steady in the face of new coronavirus lockdowns.

However, analysts said oil prices could see a correction in coming months, if their rallies were not backed by stronger fuel demand.

Severe mobility restrictions around the world to contain a surge in COVID-19 cases still weighed on fuel sales, weakening the prospect of energy demand recovery in the first half of 2021.

“Oil markets are expected to stay in a bullish tone toward February,” said Kazuhiko Saito, chief analyst at commodities broker Fujitomi Co.

“But concerns over slower demand in gasoline and other fuels in the United States and other parts of the world due to wider restrictions to contain the spreading COVID-19 pandemic may limit gains.”