Asian stocks rally on extended Wall Street bounce, easing Fed taper worries

By Anshuman Daga

SINGAPORE (Reuters) - Asian stocks rose on Tuesday on an extended bounce on Wall Street as investors drew comfort from full approval granted to the Pfizer/BioNTech vaccine and on easing worries of an imminent tapering of stimulus by the Federal Reserve.

The dollar was licking its wounds after its sharpest one- day fall since May, which spurred a 5% rally in oil prices on Monday.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.2%, with Japan and South Korean indexes jumping more than 1%. Australia shares were up 0.2% and Taiwan stocks rose 0.7%.

Chinese markets also edged up 0.2%, with technology stocks extending their recovery after enduring a pummelling in recent weeks on regulatory worries.

Wall Street's strength underpinned sentient in Asia. The Nasdaq reached an all-time closing high on Monday after the U.S. Food and Drug Administration granted full approval to the COVID-19 vaccine developed by Pfizer and BioNTech, in a move that could accelerate inoculations in the United States.

Analysts at ANZ pointed to growing expectations that decelerating global business activity will act as a restraint on central bank intentions to start dialling back monetary stimulus in the near term.

Global markets took a beating last week on worries the Fed is edging closer to tapering its stimulus. Asia's main index tumbled 4.8% last week, and MSCI's Asia Pacific index ex-Japan index is still down 2.9% so far this month.

The improved sentiment overnight drove the dollar down more than 1% against its Australian and Canadian counterparts as well as the Norwegian crown and Swedish crown.

"A positive risk backdrop has pushed flows out of the dollar," said Chris Weston, head of research at brokerage Pepperstone in Melbourne, adding that positive analyst commentary around oil and cyclical stocks had also helped the broad mood.

The dollar was up 0.04% against the yen to 109.72. The single currency was flat at $1.1738, having lost 1.11% in a month, while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was up slightly at 93.041.

Last week, the dollar index hit a nine-month high on bets the Fed would start shifting away from its accommodative monetary policy, but that view began to change on Friday when Dallas Fed President Robert Kaplan said he might reconsider his hawkish stance if the virus harms the economy.

Now, investors are less confident Fed Chair Jerome Powell's speech at Jackson Hole this week will indicate a timeline for winding down the Fed's bond-buying program.

Data overnight showed strong albeit slowing services and manufacturing activity in Europe while business activity growth in the United States slowed for a third straight month as the spread of the Delta virus variant took a toll.

The yield on benchmark 10-year Treasury notes was up at 1.2567% compared with its U.S. close of 1.255% on Monday.

In commodities markets, Brent crude oil futures edged up 0.9% to $69.45 a barrel after putting on more than 5% on Monday, as a weaker dollar and strong global equities markets boosted crude following seven sessions of declines. [O/R]

Gold prices fell slightly but hovered above the key psychological level of $1,800. [GOL/]

(Reporting by Anshuman Daga in Singapore; Additional reporting by Tom Westbrook; Editing by Shri Navaratnam)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)