Asia-Pacific markets set to trade higher as investors return to risky assets

  • Australia's benchmark ASX 200 rose 0.48% in early trade but the energy sector notched a 1.34% loss as oil prices remained under pressure.
  • Nikkei futures pointed to opening gains in the Japanese stock market.

SINGAPORE — Asia-Pacific markets looked set to trade higher Wednesday as investors returned to risky assets, confident that a massive U.S. stimulus package will soon be approved.

Nikkei futures pointed to opening gains in the Japanese stock market.

In Australia, the benchmark ASX 200 rose 0.48% in early trade but the energy sector notched a 1.34% loss as oil prices remained under pressure.

The session in Asia-Pacific follows an overnight session on Wall Street where bond yields declined and tech stocks staged a comeback — the Nasdaq Composite climbed 3.7% to post its best day since November.

"Global equities pushed higher as risk appetite returned," according to a Wednesday morning note from analysts at ANZ Research. "Investor confidence was buoyed by expectations that (U.S. President Joe) Biden's USD1.9trn fiscal stimulus package will soon be approved."

Democrats in the U.S. House of Representatives are aiming to pass the $1.9 trillion coronavirus relief bill on Wednesday so that Biden can sign it by the weekend. The legislation extends a $300 per week jobless benefit boost and programs expanding unemployment aid to millions more Americans through Sept. 6.

Currencies and oil

In the currency market, the U.S. dollar tumbled 0.37% to 91.972 against a basket of its peers, falling off an earlier high of 92.503.

The Japanese yen changed hands at 108.65 per dollar, weakening from a previous level around 108.45, while the Australian dollar lifted a touch higher to $0.7715.

Carol Kong, a currency strategist at the Commonwealth Bank of Australia, said in a morning that outside of short-term downside risks, the bank is bullish on the Australian dollar, predicting it will reach around $0.83 in the third quarter of 2021.

"Australia's successful virus containment has contributed to its 'v‑shaped' economic recovery," Kong said in the note, adding that with Covid-19 vaccines being rolled out that bounce back could accelerate. That could potentially tighten the labor market earlier than expected.

"As a result, the (Reserve Bank of Australia) may tighten monetary policy before the (U.S. Federal Reserve) which poses upside risks to our AUD/USD forecast profile," she said.

Elsewhere, oil prices remained under pressure. During Asian trading hours on Wednesday, U.S. crude fell 0.09% to $63.97 while global benchmark Brent declined in the overnight session.

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