Most Asian equities extended their impressive run on Thursday as Covid concerns eased and traders grew more optimistic that the Federal Reserve will continue to provide extensive support for some time, while focus turned to the release of US jobs data at the end of the week.
Wall Street provided a tepid lead — though the Nasdaq did squeeze out yet another record — after a private employment report came in well below forecast. Analysts said there were positives as well as negatives in the miss.
After weeks of stuttering performances across world markets, equities are back in popularity after Fed boss Jerome Powell last week indicated that while the bank intends to start tapering its ultra-loose monetary policy, it would do so cautiously.
He also suggested interest rates will remain at record lows for a period of time afterwards, though he gave no timeframe.
The US non-farm payrolls figure on Friday will be closely monitored, with some observers saying a strong reading could push the bank to start its pullback as soon as next month.
Wednesday figures from private payrolls firm ADP showed firms created far fewer posts last month than had been expected, weighed by the fresh surge in coronavirus cases around the United States.
"Although the ADP report doesn't have a great track record at predicting US non-farm payrolls outcomes, the big miss was too big to ignore," said National Australia Bank's Rodrigo Catril.
He added that a big miss in Friday's data — forecasts are for around 750,000 — would mean the Fed's goal of making "further substantial progress" in the jobs market would take longer to achieve, "thus delaying the tapering decision from September to November".
"Bad news in the labour market is good news for risk assets given the punchbowl will remain well liquified for a bit longer," he added.
– 'Stick with their word' –
Hong Kong led gains, putting on more than one percent, as it continued its rebound from a painful sell-off in recent weeks fuelled by China's crackdown on a range of industries, particularly technology.
Shanghai, helped by news that the People's Bank of China will provide tens of billions of dollars in low-cost funding to lenders to help them offer more support to small and medium-sized companies, as Beijing tries to cushion its economy against a growth slowdown.
Tokyo, Singapore, Taipei, Manila and Jakarta also rose. Sydney, Seoul and Wellington dipped.
The broadly upbeat mood comes as investors look past a spike in infections from the Delta coronavirus variant, which has forced some countries to impose lockdowns, and instead focus on the long-term recovery outlook.
"The market is fading Covid more as a risk in terms of really hampering economic activity," Tracie McMillion, at Wells Fargo Investment Institute, told Bloomberg Television.
"We think the Fed is going to stick with their word and they will start tapering later this year. But we don't think they are going to be in any hurry to raise interest rates."
Oil prices extended losses a day after OPEC and other major producers agreed to lift output as the economy rebounds and demand is seen picking up.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 0.1 percent at 28,476.01 (break)
Hong Kong – Hang Seng Index: UP 1.1 percent at 26,322.40
Shanghai – Composite: UP 0.3 percent at 3,576.38
Dollar/yen: DOWN at 109.96 yen from 110.01 yen 2100 GMT
Pound/dollar: DOWN at $1.3776 from $1.3781
Euro/dollar: UP at $1.1840 from $1.1838
Euro/pound: DOWN at 85.93 pence from 85.95 pence
West Texas Intermediate: DOWN 0.9 percent at $67.99 per barrel
Brent North Sea crude: DOWN 0.8 percent at $71.04 per barrel
New York – Dow: DOWN 0.1 percent at 35,312.53 (close)
London – FTSE 100: UP 0.4 percent at 7,149.84 (close)