(Bloomberg) — Stocks and sovereign bond yields climbed Friday on optimism about the economic outlook, though uncertainty lingers about potential risks from the debt crisis at China Evergrande Group.

MSCI Inc.’s Asia-Pacific index rose for a second day, led by Japan. Stocks declined in Hong Kong and China. Evergrande is yet to issue a statement about a due Thursday dollar-bond payment interest. Global market unease about contagion from Evergrande has ebbed, but it remains unclear if Beijing will manage the fallout from any potential default at the word’s most-indebted developer.

U.S and European futures were little changed after the S&P 500’s biggest two-day gain since July. The Wall Street advance was led by economically-sensitive sectors like energy and financials, as investors embraced the view that a looming reduction in Federal Reserve stimulus shows confidence in the recovery from the pandemic. Dollar climbed. Oil traded at $73 per barrel.

A global bond sell-off was triggered by the prospect of tighter money policy. The long-term Treasury yields rose the most over the past 18 months because traders projected expectations of a Fed rate increase at the end 2022. Australian and New Zealand sovereign debt saw yields rise. 

Investors in equity are optimistic that the pandemic-related supply chain snarls and the strain of delta virus will only cause a temporary setback for economic recovery. Also, central banks pledged gradual withdrawal of stimulus. If the long-term interest rates continue to rise, it could threaten this optimistic picture.

Clarity from the Fed has allowed risk assets to flourish, Elaine Stokes, a portfolio manager at Loomis Sayles & Co., told Bloomberg Television, adding that “what they did is tell us that they feel really good about the economy.”

While the bond selloff has vindicated Treasury bears who argue yields are too low to reflect fundamentals, others see limits to how high they can go. 

“We’d expected bond yields to go higher, given the macro situation where growth is still very strong,” Sylvia Sheng, global multi-asset strategist with JPMorgan (NYSE:) Asset Management, said on Bloomberg Television. “But we do stress that is a modest view, because we think that upside to yields is still limited from here given that central banks including the Fed are still buying bonds.”

Elsewhere, gold rose and traded near $44,000.

Stocks

• were steady as of 7:10 a.m. in London. The rose 1.2%
• slipped 0.1%. The rose 0.9%
• Japan’s index climbed 2.3%
• Australia’s slipped 0.4%
• South Korea’s Kospi shed 0.1%
• China’s dropped 0.4%
• Hong Kong’s was steady
• {Euro futures} were flat

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro was at $1.1738
• The Japanese yen was at 110.52 per dollar
• The was at 6.4604 per dollar

Bonds

• The yield on 10-year Treasuries was at 1.43%
• Australia’s 10-year bond yield increased 15 basis points to 1.41%

Commodities

• West Texas Intermediate crude was at $73.38 a barrel, up 0.1%
• Gold was at $1,755.83 an ounce, up 0.8%