Stocks rise higher with a cautious eye on Evergrande

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By Tom Westbrook

SINGAPORE (Reuters) – Asian stocks made small gains on Thursday, but the optimistic mood that took the Dow Jones and bitcoin to record highs waned amid new concerns over China’s real estate sector following the collapse of a sale of assets to ailing developer Evergrande.

The largest MSCI index of Asia-Pacific stocks outside of Japan edged up 0.3% to a one-month high. The Japanese Nikkei fell 0.3% and S&P 500 futures were flat.

Currencies and commodities were broadly stable, leaving risk-sensitive units like the Aussie at multi-month highs while Brent crude futures hit a new three-year high of $ 86.10 on barrel.

Late Wednesday, China Evergrande, the heavily indebted developer at the center of a credit crunch in China’s real estate industry, said it had abandoned a $ 2.6 billion sale of a subsidiary stake and that he had made no progress on other sales.

Its shares fell 10% at the opening in Hong Kong and the company will be in default if a 30-day grace period due to expire over the weekend passes without the payment of a bond coupon in dollars.

Shares of rival developers were buoyant Thursday with assurances from a number of senior Chinese officials that problems in the industry could not escalate into a full-blown crisis, but global investors remain nervous.

“If you looked at your screens you would think the world is a pretty happy place,” said Andrew Ticehurst, rate strategist at Nomura in Sydney.

“The US stock market has risen for six consecutive days, bitcoin has hit a record high and the US bond market is calm. On the surface, it looks benign,” he said.

“But below the surface, there are a number of things that we are uncomfortable with,” he added, primarily the slowdown in the Chinese economy seen in data earlier this week, and concerns about potential fallout from Evergrande’s problems.

‘PROPERLY BELONGING’

Overnight on Wall Street, strong earnings helped the Dow Jones hit a record high during trading and the S&P 500 rose 0.4% to finish within a few whiskers of its record closing high. The Nasdaq relaxed slightly. [.N]

The VIX volatility index, sometimes referred to as Wall Street’s “fear gauge”, fell to its lowest level in two months.

Yields on longer-term Treasuries rose on growth and inflation expectations and the benchmark 10-year Treasury yield hit a five-month high of 1.673% on Wednesday. It was last located just below this level at 1.6656% during the Tokyo session.

Investors believed that soaring energy prices and tightening labor markets would push policymakers in the United States and elsewhere to raise interest rates before long.

Fed funds futures have priced a 25 basis point hike in U.S. rates in the third quarter of 2022, while Eurodollar markets expect higher rates as early as the second quarter.

Even more aggressive moves in antipodes rate markets – along with high commodity prices – have helped the Australian and New Zealand dollars to strong gains in recent sessions.

“Everything is fine, the shindig is on and so nobody wants the big dollar,” Rodrigo Catril, senior currency strategist at National Australia Bank, said in a note to clients.

The Aussie was last up 0.3% to a 15-week high of $ 0.7541 on Thursday, while the Kiwi rose 0.1% to a more than four-month high at 0, $ 7,210. [FRX/]

The euro and yen were flat, with the yen at 114.33 per dollar and one euro buying $ 1.1662.

Bitcoin, which hit a record high on Wednesday following the listing in the US of a futures-based exchange-traded fund, rose from its high at $ 64,651 while its other crypto-ether cash

US crude rose 0.5% to $ 83.84 per barrel and gold held its overnight gains at $ 1,788 per ounce. [O/R][GOL/]

(Reporting by Tom Westbrook in Singapore; Editing by Sam Holmes)


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