Asia stocks rise as Treasury yields bounce higher

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Stocks in Asia edged up Monday morning as U.S. Treasury yields bounced higher after plunging last week which sent markets into a panic.

In Japan, the Nikkei 225 rose 0.87% in early trade as shares of convenience store operator FamilyMart surged 5.34%, whie the Topix added 0.62%.

Meanwhile, South Korea’s Kospi advanced 0.36%, while the S&P/ASX 200 in Australia gained 0.86%.

Overall, the MSCI Asia ex-Japan index rose 0.24%.

Market reaction toward a recent unveiling of interest rate reform in China will be watched, when mainland Chinese shares begin trading at 9:30 a.m. HK/SIN.

On Saturday, the People’s Bank of China said it will improve the mechanism used to establish the loan prime rate from this month, allowing it to “use market-based reform methods to help lower real lending rates. ” That comes as Beijing attempts to prop up a slowing economy that has been hit by its ongoing trade war with Washington.

In Hong Kong, shares of airline Cathay Pacific will also be watched, following the resignation of its CEO last Friday “in view of recent events. ” The firm has come under immense political pressure from Beijing following the discovery that two of its pilots were involved in ongoing protests in Hong Kong that have rocked the city for weeks.

US bond watch

The moves come following a wild trading week that saw turbulence in the markets as investors reacted to developments in U.S. Treasurys.

The yield on the benchmark 10-year Treasury note was last at 1.5724%, while the rate on the 30-year Treasury bond was at 2.06%.

Treasury yields rebounded last Friday, touching a high after a Der Spiegel article said that Germany would boost spending by issuing more debt.

“For now hopes of German fiscal stimulus is tied to the economic outlook. Nevertheless, hopes of fiscal stimulus will be important to watch with a broad-based global expansion of fiscal policy still being one way to scare a bond market with yields at extreme lows,” Tapas Strickland, an economist at National Australia Bank, wrote in a note.

The bond market flashed a signal last Wednesday that is normally interpreted as a sign a recession is on the horizon, as the yield on the 10-year Treasury note briefly broke below the rate for the 2-year. The U.S. 30-year Treasury yield dropped to a record low last Thursday, while the yield on the benchmark 10-year notes dipped to a three-year low, as investors sought out safe-haven assets.

Asia-Pacific Market Indexes Chart

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 98.195 after rising from levels below 97.5 last week.

The Japanese yen traded at 106.34 against the dollar following volatile movements in the previous week that saw it touching highs below 105.5. The Australian dollar changed hands at $0.6784 after seeing lows below $0.675 last week.

Oil prices rose in the morning of Asian trading hours. The international benchmark Brent crude futures contract added 0.75% to $59.08 per barrel, and U.S. crude futures gained 0.64% to $55.22 per barrel.

Here’s a look at the data due today:

  • Hong Kong: Unemployment data at 4:30 p.m. HK/SIN

— CNBC’s Spencer Kimball and Yun Li contributed to this report.

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