Global stock prices inched higher while US bond yields hovered near a 13-month peak on Monday as investors bet US economic growth will accelerate after the $1.9 trillion stimulus bill President Joe Biden signed into law last week.
A rollout of COVID-19 vaccinations in the United States and some other countries stoked a bullish mood on risk assets even as investors become wary of key central bank policy meets later in the week, including the US Federal Reserve's.
"The US is now vaccinating more than three million people a day, with President Biden now saying all adults will be able to get a shot by May 1. It could soon achieve a herd immunity and an economic normalisation," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
US S&P500 futures rose 0.2% in early Asian trade, trading just below a record high level touched last week, while Japan's Nikkei ticked up 0.3%.
Mainland Chinese shares buckled the trend to trade lower despite data showing a quickening in industrial outputand a rise in retail sales.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2%, with Hong Kong leading thegains.
"Most market participants and policy-makers have beensurprised by the speed of the recovery. On our estimates, the US economy will reach pre-COVID-19 output levels by the current quarter," said Chetan Ahya, global head of economics, ina note.
"Fiscal policy is doing much more than fill the output hole.Transfers to households have already exceeded the income lost inthe recession. As reopening gathers pace, the labour market ispoised for a sharp rebound."’
Covid relief bill
The US House of Representatives gave final approval last week to the COVID-19 relief bill, giving Biden his first major victory in office.
Some investors speculate part of $1,400 direct payments to households could find its way to stock markets, as seemed to be the case with similar direct payments made last year for coronavirus relief.
Investors also suspect the $1.9 trillion package, which amounts to more than 8% of the country's GDP, could stoke inflation - to the detriment of bonds, especially when theiryields are so low.
Rising inflation expectations could prompt the Federal Reserve to signal it will start raising rates sooner when itannounces its latest economic projections at the end of Federal Open Market Committee (FOMC) meeting on Wednesday.
"Following the fiscal stimulus packages it is inevitablethat Fed GDP forecasts will be revised up, and some FOMC membersmight think rates will have to move higher sooner than theyanticipated last December," wrote economists at ANZ.
The 10-year U.S. Treasuries yield stood at 1.628%, having risen to as high as 1.642% on Friday, a high last seen in February last year.
On top of continued US economic optimism and increased debt supply expectations after the stimulus, uncertainties aboutwhether the Fed will extend an emergency regulatory easing inthe so-called "supplementary leverage ratio" (SLR) added to thesense of unease.
Higher US bond yields saw the dollar rising against othermajor currencies.
The euro slipped to $1.1947 from last week's high of$1.1990 while the dollar held firm at 109.12 yen, nearnine-month high of 109.235 set last Tuesday.
The British pound slipped 0.25% to $1.3934.