Asian markets continue to rebound, chipping away at monthly losses

Asia-Pacific equities faded Tuesday, led by Chinese big caps, as buying appetite for global stocks appeared to be waning at the end of a roller-coaster month.

The Shanghai Composite
SHCOMP, -1.13%
fell 1.1%, snapping a six-day winning streak. Weakness also weighed on indexes in Taiwan and Hong Kong, where the benchmark Hang Seng
HSI, -0.73%
fell 0.7% on declines in banks and materials producers. The tech-heavy Taiex
Y9999, -0.20%
ended down 0.2% after earlier rising as much as 0.9%.

Japanese stocks, though, held up as the Nikkei
NIK, +1.07%
finished with a 1.1% gain. Helping that market was the yen
USDJPY, +0.59%
reversing some of early Mondays gains overnight. It has risen for seven of the past nine sessions, cutting its February drop to 3.1%.

Later Tuesday will be Jerome Powells first appearance on Capitol Hill as head of the Federal Reserve.

Read: Powells goal as he heads to the Hill: No blinking at inflation

For the dollar to continue rebounding, Powell needs to set the stage for the Fed to upgrade its economic outlook at next months policy meeting, affirm the stance for U.S. inflation to rise towards its 2% target this year and open the door for the Fed to consider a gradual path of one hike per quarter, said DBS. Markets have been benefiting from falling global bond yields.

Ten-year U.S. Treasury yields
TMUBMUSD10Y, +1.05%
havent been able to reach the psychologically important 3% level. They fell for three straight sessions through Monday and in five of the past seven, easing back to 2.86%. The benchmark yield on 10-year Treasurys started the year at 2.41%. Meanwhile, Japans 10-year yield matched a 2018 low of 0.044% on Tuesday.

U.S. bond markets appear to have arrived at a point where evidence of improved wage growth and inflation will be required to push yields significantly higher, said Ric Spooner, chief market analyst at CMC Markets. This has given license to investors to push stock indexes higher in response to good earnings seasons.

Overall in global stocks, February saw a big early slide pushing some markets into correction territory for the first time in two years which was followed by steady gains that have since erased much of the decline.

Take the Shanghai Composite, home to large China firms many of which are state controlled. So far this month, the weekly moves have been at least 2%, after having just one such weekly change all of last year.

But Chinese small-cap stocks extended Mondays outperformance. The ChiNext Price Index rose an additional 0.8% after jumping 3.6% a day earlier, its biggest gain in seven months. Even so, early gains Tuesday tapered off as the day progressed.

The stock moves in China come as mainland investors are still digesting news that the Communist Party plans to remove term limits on the countrys presidency, potentially allowing Xi Jinping to remain in power indefinitely.

Read: Xi Jinpings power grab does hark back to darker times in China, says expert

While that is potentially damaging to the long-term prospects for establishment of the rule of law, said Andy Rothman, investment strategist at Matthews Asia, it is unlikely to have a significant impact on near-term economic prospects or the investment environment.

Related Topics Asia Markets China Japan Australia Singapore Foreign Investment

Quote References SHCOMP -37.51 -1.13% HSI -229.94 -0.73% Y9999 -21.23 -0.20% NIK +236.23 +1.07% USDJPY +0.63 +0.59% TMUBMUSD10Y +0.03 +1.05%

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