TOKYO Reuters shares gained in Asia on Monday, after Wall Street rebounded strongly at the end of last week as oil prices eased, tempering fears of prolonged inflation and the accompanying aggressive Federal Reserve tightening.
Treasury yields were subdued and the dollar hovered near the lowest level in more than a week as investors continued to assess the outlook for U.S. rate hikes and the potential for a recession.
When the markets reopen, the U.S. stock futures point to a 0.25% decline. The S&P 500 went up more than 3% on Friday, adding to an almost 1% gain on Thursday.
We've had a good end to the week in the U.S. markets and I think that's going to be the main scene for Monday in Asia, despite a lack of news or other new drivers, said Rob Carnell, chief economist for Asia-Pacific at ING.
We had two decent equity days on the run. It's perhaps notable that you've had some consistency there. Crude oil fell in volatile trading on Monday as the market grappled with concerns that a global economic slowdown could depress demand versus the loss of Russian supply due to sanctions over the Ukraine conflict.
Both Brent and U.S. West Texas Intermediate WTI futures fell more than a dollar earlier in the day. But prices rebounded, with Brent at $112.78 a barrel, down 34 cents, and WTI at $107.17, down 45 cents. O R U.S. long term Treasury yields hovered around 3.13% after a two-week low just above 3% at the end of last week as traders removed bets for hikes next year, but still pondered if aggressive tightening this year could cause a recession.
Yields have dropped from 3.456%, the highest in more than a decade, before the mid-month Fed meeting. The central bank increased rates by 75 basis points, the biggest increase since 1994, and signalled that a similar move is possible in July.
The market remains focused on the trade-off between the policy response to high inflation and the fears of a hard landing, according to Westpac rates strategist Damien McColough.
There are ongoing discussions as to whether long-end yields have peaked, but we would not expect 10-year yields to fall below 3%. The dollar was steady on Monday, as it continued to consolidate near the lowest level since the middle of the month against major peers.
The dollar index - which measures the currency against six rivals -- was little changed at 104.01, after gradually gravitating towards the June 17 low of 103.83 over the past few sessions.