Asian shares climb as US yields ease, China signals economic support

Highlights:

• Nikkei rises 1.2%; Chinese stocks up 1.2%
• European, US futures up
• Dollar retreats against yen, euro; US yields ease
• China's easing signal buoys sentiment
• Bank of Korea hikes rates; Singapore tightens

Asian shares tracked Wall Street higher on Thursday, while US Treasury yields eased and the dollar retreated, as the latest US data raised hopes that inflation may be close to peaking, though several major central banks raised rates aggressively.

Traders were waiting for a European Central Bank meeting later in the day to see if it was as hawkish as others have been.

Share market sentiment received a boost from China's announcement late on Wednesday that authorities should cut banks' reserve requirement ratios (RRR) soon to support an economy battered by Covid-19 lockdowns. 

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4%, buoyed by a 0.5% gain in Australia's resource-heavy shares and a 1.2% advance in mainland China's blue chip stocks. Japan's Nikkei was up 1.2%.

European markets are set to open higher, with EUROSTOXX 50 futures up 0.56%, German DAX futures rising 0.56%, and FTSE futures gaining 0.24% in Asia trade.

S&P500 futures rose 0.2% and Nasdaq futures were 0.4% higher.

David Chao, Hong Kong-based global market strategist at Invesco, said several developments were boosting shares on Thursday, including moderating gains in US core consumer prices, which could mean inflation pressures may start to abate soon, and China's announcement of more policy support.

"I've argued that an upswing in money supply and credit growth could provide a floor for Chinese equities and signal that investor sentiment may soon start to improve, especially if COVID and geopolitical concerns start to wane," Chao said.

Elsewhere, other central banks reinforced the hawkish global mood ahead of the ECB meeting. The Bank of Korea surprised markets with a rate hike and the Monetary Authority of Singapore also tightened policy.

That did not appear to affect the sentiment much. South Korean shares KOSPI reversed earlier losses to be up 0.1%, while Singapore's benchmark Straits Times Index also rose slightly.

Equity markets have suffered from central banks' hawkishness, but all three Wall Street indexes gained over 1% on Wednesday.

Asian markets including Hong Kong, Singapore and Australia are on holiday on Friday for the long Easter weekend, as are major European and US markets.

Hopes that US inflation may have peaked led US Treasury yields to extend their decline on Thursday. The yield on 10-year Treasury notes was at 2.6636%, compared to an over three-year peak of 2.836%, before the data released on Tuesday showed inflation running less hot than investors had feared.

The two-year yield , which rises with traders' expectations of higher Fed fund rates, touched 2.3156%, compared with a close of 2.3645% the previous day.

Retreating US yields offered some relief to the bruised yen on Thursday, with the safe haven currency up 0.3% against the greenback. It had weakened past the 126 yen per dollar mark in the previous session.

The prospect of fast and aggressive US interest rate hikes and growing market expectations that the Bank of Japan will keep rates ultra-low in the near term have weakened the yen.

The euro also gained 0.2% against the dollar, although it was not too far away from its 1-month low on concerns about the war in Ukraine.

Ukraine warned on Wednesday that Russia was ramping up efforts in the south and east as it seeks full control of Mariupol, while Western governments committed more military help to bolster Kyiv. 

Oil prices fell on Thursday, after rising sharply in the first half of the week, as traders weighed a larger-than-expected build in US oil stocks against tightening global supply.

US crude dipped 0.48% to $103.75 a barrel. Brent crude fell 0.1% to $108.70 per barrel.

Gold was slightly lower, hovering around its 1-month high. Spot gold was traded at $1,974.72 per ounce.