Asian shares slip but economic optimism keeps world shares near record high

Asian shares slipped on Friday but world stocks held near a record high after strong US economic data and the Federal Reserve’s commitment to continue supporting the economy fueled investors’ appetite for risk.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.5% with both Japan and China falling ahead of a long weekend. Both markets will be closed through Wednesday.

MSCI’s broadest gauge of world stocks covering 50 markets, ACWI, was little changed, a day after it hit a historic high, extending its monthly gains to 5.1%.

On Wall Street, the S&P 500 also closed at an all-time high while the Nasdaq Composite hit a intraday record before paring some gains.

For both ACWI and S&P 500, analysts are now expecting the earnings in the next 12 months to recover to above their pre-pandemic levels.

Amazon reported stellar results late on Thursday, lifting its shares by 2.4% in an after-hours trade.

Data on Thursday also showed US economic growth accelerated in the first quarter, fueled by massive government aid to households and businesses.

New York City aims to “fully reopen” on July 1 after more than a year of closures and capacity restrictions, Mayor Bill de Blasio said, buttressing hopes for recovery in the battered service sector.

Fed Chair Jerome Powell said on Wednesday that “it is not time yet” to begin discussing any change in policy after the US central bank left interest rates and its bond-buying program unchanged, despite taking a more optimistic view of the country’s economic recovery.

The 10-year US Treasury yield rose to 1.690%, its highest in more than two weeks, and last stood at 1.641%.

“For now we are likely to see strong economic data from the US and that means we need to be wary of further rise in US bond yields, and the dollar/yen,” said Toshiya Nakamura, chief manager of forex trading at Mitsubishi Trust Bank.

In the currency market, the yen was listless at 108.72 per dollar, having hit a two-week low of 109.22 as higher US bond yields helped the dollar.

The positive risk mood saw the euro extending its bull run to a two-month high of $1.2150 in the previous session and it last stood at $1.2117. With 3.3% gains so far this month, it is on course for its biggest monthly rise in 9 months.

The Canadian dollar extended its gains to a three-year high of C$1.22715 per US unit, boosted by the Bank of Canada’s tapering of its bond-buying program and higher commodities including oil and lumber.

Oil prices held near six-week highs as strong US economic data, a weak dollar and an expected recovery in demand outweighed concerns about higher COVID-19 cases in Brazil and India.

Brent slipped 0.4% to $68.30 per barrel in Asia, after having hit a high of $68.95 on Thursday while US West Texas Intermediate (WTI) eased 0.3% to $64.80 per barrel.

“Strong US data is supporting the market. But on the other hand, given that oil producers have capacities to boost outputs further, there will be resistances around $65 for WTI and $70 for Brent,” said Tatsufumi Okoshi, senior commodity strategist at Nomura Securities.