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HONG KONG (Reuters) – Asian shares were on edge on Friday, hurt by persistent uncertainty around the fate of debt-ridden China Evergrande, even as increased risk appetite drove U.S. stocks and Treasury yields higher.
MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed after falling 0.7% this week, poised for its third weekly loss in a row.
Australian shares fell 0.4%, while the Hong Kong benchmark was mostly flat.
Japan’s Nikkei rose 2%, however, catching up with global gains after the market was closed for a public holiday. Chinese blue chips reversed early losses to gain 0.3% after a cash injection from the central bank brought its weekly injection to 270 billion yuan ($42 billion) – the largest since January.
U.S. stock futures, the S&P 500 e-minis, were up 0.5%, while European stock futures and British stock futures , slipped.
Investors continued to worry about the fate of property developer Evergrande which missed an interest payment deadline on Thursday and has entered a 30-day grace period.
Evergrande shares fell 11% on Friday, extending losses following a Reuters report that some offshore bondholders had not received interest payments by the Thursday deadline. It rallied 17.6% the previous day after the company said it had agreed to settle interest payments on a domestic bond.
Global investors have been on tenterhooks as debt payment obligations of Evergrande, labouring under a $305 billion mountain of debt, triggered fears its malaise could pose systemic risks to China’s financial system.
Ray Ferris, chief investment officer for South Asia at Credit Suisse (SIX:CSGN), said that while investors were jittery about China’s prospects due to woes in the property sector and a slew of regulatory changes, there was positive sentiment elsewhere.
“Growth in the large developed economies is above trend, likely to remain above trend and monetary policy remains very supportive of asset prices likely all the way through the middle of next year,” he said.
“Every once in a while shocks to the system give us a correction, but these are more shallow than in the last several decades because of the weight of money out there that needs a home.”
The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all gained more than 1% overnight, as investors appeared to take the Federal Reserve’s latest tapering signals in stride. (N)
The Fed said on Wednesday it could begin reducing its monthly bond purchases by as soon as November, and that interest rates could rise quicker than expected by next year. The November deadline was largely priced in by markets.
The risk-on sentiment in stock markets weighed on the dollar. The dollar index dropped sharply overnight against a basket of its peers, falling from its highest in nearly one month to a one-week low. It was broadly steady in Asian hours, though it strengthened against the yen to its highest since Aug. 13. [FRX/]
The yield on benchmark 10-year Treasury notes firmed marginally to 1.444%, its highest since July 2, gaining 15 basis points over the last two days.
The bulk of the gains came overnight after a rate hike by the Norwegian central bank and hawkish remarks from the Bank of England reinforced market expectations that the Federal Reserve would begin tapering by year end.
Oil prices rose for a fourth straight day due to global supply concerns following powerful storms in the United States. [O/R]
Brent crude was up 0.2% to $77.37 a barrel and U.S. oil was up 0.1% to $73.36 a barrel.
Gold regained some ground on Friday, with the spot price rising 0.5% to $1,751 per ounce. It fell over 1% the day before as higher yields hurt the non-interest bearing asset. [GOL/]
