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Asian equities set to rise amid broader concerns about the ease of hedge fund default

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NEW YORK: Asian stocks were expected to open higher on Tuesday as investors allayed previous worries about a hedge fund default that rocked global bank stocks overnight, while rekindled inflation concerns pushed returns bonds on the rise.

The firmer tone in Asia comes as Wall Street slashed past banking sector losses, fearing that problems with a failing hedge fund could spill over into the banking industry.

Nomura and Credit Suisse face billions of dollars in losses and regulatory oversight after a U.S. investment firm, named by sources as Archegos Capital, defaults on equity derivative bets, putting investors on the line. difficulty over who else might be exposed. Shares of Nomura and Credit Suisse were down 16.3% and 13.8%, respectively, on Monday.

At the start of Asian trading, however, Australian S & P / ASX 200 futures were up 0.44% and Japanese Nikkei 225 futures were up 0.86%.

Michael McCarthy, chief market strategist at CMC Markets, said the concerns “are very specific to a small number of hedge funds.” He said he did not expect any systemic fallout.

Still, the dollar gained from buying safe havens, while bond prices came under pressure as the outlook for economic growth raised the specter of inflation, he added.

10-year benchmark yields hit a session high of 1.728% in the United States after New York State announced on Monday that people aged 30 and older could get the coronavirus vaccine from March 30.

Crude prices have risen slightly following a report that Russia will support broadly stable oil production when the Organization of the Petroleum Exporting Countries and its allies meet this week.

Futures had previously fallen on news that a container ship in the Suez Canal blocking traffic for nearly a week had been bailed out, bringing some relief to concerns about a blockage in supply.

Optimism about rapid vaccinations, the record stimulus in the United States and robust estimates of future earnings drove the Dow and S&P 500 to record closing highs last week.

On Wall Street, the Dow Jones Industrial Average rose 0.3%, the S&P 500 lost 0.09%, and the Nasdaq Composite fell 0.6%.

The KBW Nasdaq Bank stock index finished 2.3% lower after falling nearly 3.5% during the session.

“There are still discussions about whether, and which, US banks could be affected,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey. “It’s a lurking question. But so far the market has basically taken (the news) in stride.”

(Reporting by Alwyn Scott; Editing by Sam Holmes)


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