Asian equities observe a positive start to the trading session as the optimism on Wall Street echoes into the region. The key story dominating the sentiment in the US yesterday was the bipartisan USD 1.2trn infrastructure deal agreed on, which possibly supported the cyclical/value rally in the US. In comparison, US Initial Jobless Claims remained above 400k, vs expectations for a slip below.
Investors will be paying attention to the banking sector as US major banks are expected to provide capital disbursement plans after the close on Monday. The total amount available for share buybacks and dividends should grow considerably as the COVID constraints are lifted. On the radar for the session ahead, traders will be watching the annual rebalance of the Russell index and are closely watching the Chinese bond market as five-year credit default swaps rose at the opening. It is the highest level since March 23 last year. Local press reports that China’s local governments and state firms are struggling to refinance their debt as investors ignore them over a lack of support from Beijing, and default risk is growing, increasing the hedging cost in the complex as a sell-off in bonds continues.
