Stocks and US futures rose along with Asian dollar bonds as optimism about vaccines eased the concern about the Omicron variant and Chinese policies helped to buffer against fallout from mounting property debt distress.
Steps by Chinese authorities to limit the fallout from property market woes lifted some risk assets in Asia even as key debt deadlines at China Evergrande Group and Kaisa Group Holdings passed without any sign of payment. Asian dollar bonds and Chinese junk notes rallied the most in a month, extending a rebound this week after China’s central bank cut the reserve requirement ratio for most banks on Monday.
Risk assets are recovering after a bout of turbulence sparked by the emergence of the new virus variant. So far, Omicron cases have not overwhelmed hospitals and vaccine developments are promising. “This anecdotal evidence appears to have calmed financial markets, for now, as evidenced by the recovery in risk assets,” Carol Kong, a strategist at the Commonwealth Bank of Australia, said in a note. “But we caution against drawing conclusions from these early reports.” Unless the variant proves resistant to vaccines, “we expect the global economy will largely continue with its pre‑omicron recovery path”, she said.