Records shatter as global stocks boom

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets.

Investors in Asia could not be going into Friday’s trading in more bullish spirits as the U.S.-led surge in mega tech fuels a global stock market boom, although there will be temptation to book some profit ahead of the weekend.

Japan’s Nikkei smashed its way to a new all-time high on Thursday after Nvidia’s post-market surge following its fourth-quarter results, a path followed later in the day by Europe’s Stoxx 600, the S&P 500 and the Dow Jones Industrials.

The relentless rise around the world on Thursday, propelled by Nvidia’s 16.5% surge, should set the tone for Asia on Friday.

Chinese stocks, of course, are nowhere near all-time highs, but they are on a roll too. Since plumbing five-year lows a few weeks ago, they have rebounded more than 10% and are on their longest winning streak in over three and half years.

A close in the green for the CSI 300 index on Friday will seal its best run in more than six years.

Improving sentiment towards China is in large part down to the various steps taken by authorities in Beijing to revive economic activity and prop up markets, especially the battered housing market.

These measures include a cut in the benchmark 5-year lending rate, which influences the pricing of mortgages. It is too soon to determine the success or otherwise of this week’s move, but Chinese house price figures on Friday will be closely watched.

House prices have been outright declining year-on-year for the last two years. A return to growth will go a long way to reassuring investors that the worst of the property sector meltdown is over and that the economy is back on a firmer growth track.

Will Japan’s extraordinary rally continue or fizzle out on Friday? The scale of the rally equally points to both – the Nikkei’s 17% surge this year shows that momentum is strong; but a 17% surge in less than two months will tempt some investors to take some chips off the table.

While the mood across global markets is being set by equities, the rise in U.S. bond yields and dogged resistance of the dollar cannot be ignored in Asia and emerging markets.

The 10-year Treasury yield rose to a three-month high of 4.35% on Thursday and rates markets continue to pare back U.S. rate cut expectations – the first Fed cut is now fully priced for July, and barely 80 basis points of easing is in this year’s curve.

Rising U.S. yields and a ‘higher for longer’ Fed at some point are likely to bump up against the tech-fueled euphoria sweeping global equities, and when they do, Asia could be hit hard.

But that probably won’t be Friday.

Here are key developments that could provide more direction to markets on Friday:

– China house prices (January)

– Singapore, Malaysia inflation (January)

– New Zealand retail sales (Q4)

(By Jamie McGeever)