Asia shares rise as selloff in global bonds, bitcoin pauses

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.3% while Japan’s Nikkei rose 0.8%

Asia shares were on steadier footing on Wednesday, as a brief selloff in global bond markets and cryptocurrencies abated.

Bitcoin reclaimed the $90,000 level.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.3% while Japan’s Nikkei rose 0.8%.

Calm was restored to markets on Wednesday after an average start to the week, where expectations of a looming rate hike in Japan triggered a global bond selloff and exacerbated a slide in cryptocurrencies, leaving stocks caught in the rush from risk assets.

The narrowing in spreads and movement in the yen may have resurfaced some of the carry trade fears and unwinding of leverage positions, said Kerry Craig, global market strategist at J.P. Morgan Asset Management, referring to the prospect of falling rate differentials between the U.S. and Japan.

Rightly or wrongly, there was a period when the performance of crypto was being used as a gauge for risk sentiment, but we also know that the market is sensitive to broader liquidity conditions, he added.

Moves in Japanese government bonds (JGBs) were more muted in the early Asian session on Wednesday, though they continued to face downward pressure as investors ramped up bets for a Bank of Japan (BOJ) rate hike later this month.

The five-year JGB yield hit its highest since June 2008 at 1.38%, while the 40-year JGB yield was up 1 bp to 3.695%. Bond yields move inversely to prices.

Given the lack of major market catalysts for now, analysts said the focus also shifted back to an expected rate cut from the U.S. central bank next week, which has improved market sentiment.

I just can’t see any reason why equities won’t be well supported into the FOMC rate cut next week, and I think then you start to hit that really nice sweet spot in mid-December when equity markets just rally, said Tony Sycamore, a markets analyst at IG.