Asian Shares Rise and Yen Slides, as Traders Buy Risk

On Tuesday, Asian shares moved higher, as they enjoyed the aftermath of yet another day of record highs on Wall Street, while the safe-haven yen slid lower with traders choosing to stay in riskier assets. A number of asset classes, ranging from Japan’s Nikkei Stock Average to oil, have all reached one-month highs, as they walked back losses that had occurred late in November when the Omicron variant of the coronavirus had first emerged and driven investors to opt for safe-havens. However, investors are now making a return to riskier assets with the worst fears about the impact of the new coronavirus variant subsiding.

There was a 1.3% gain in Japan’s Nikkei and it reached its highest level since November 26th, whereas there was a 0.66% gain in the broadest MSCI index of Asia-Pacific shares excluding Japan. However, the broad benchmark is still not close to the levels it had reached in late November because of the recent losses seen in index heavyweights like Tencent and Alibaba. Senior market analysts said that the risk appetite remained high and that investors were not troubled with the Omicron or the coronavirus situation in China. On December 27th, China had reported 209 confirmed cases of the coronavirus, which was an increase from a day earlier when new cases were 200. 

The new wave of cases is being seen in the northwestern province of Shaanxi in China, where the provincial capital Xian has been put under a lockdown. Elsewhere, French and British authorities have decided to hold off from imposing strict restrictions on movement, as they bet that despite the surge in cases, the high rates of vaccination would prevent hospitals from being overwhelmed. There was a 1.38% increase in the S&P 500 overnight, as it ended on Monday at a record with strong retail sales in the holiday season underscoring economic strength. 

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Meanwhile, there was a 0.98% increase in the Dow Jones Industrial Average and a 1.39% increase in the Nasdaq Composite. The risk-on mood was apparent in different asset classes. On Tuesday, oil prices also extended their gains cautiously, after they surged by almost 2% to reach their highest value in a month a day earlier. There was a 0.4% increase in Brent crude, as it reached $78.89 per barrel, while a 0.4% gain was also seen in US crude, as it reached $75.90 per barrel. Meanwhile, the yen had declined to a value of 114.87 against the dollar, as it reached a low of one month earlier in the session.

Another safe haven, the US dollar lost some ground to other currencies. The pound gained against the dollar by 0.5% on Monday and was trading at a high of five weeks at $1.3445. But, US Treasury yields saw a surge that gave the US dollar a boost. There was a 0.758% increase in the two-year yield in early Asian trading, which makes it its highest value since March 2020 after there was weak demand for new two-year notes in an auction a day earlier. 

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