Tom Westbrook

SINGAPORE, (Reuters) – Asian equities reached three-week highs Wednesday after cash fled tumbling bond market markets flowed back to big tech and other beaten up sectors. Meanwhile, the potential for further supply disruptions in Ukraine kept commodity and oil prices high.

MSCI’s Asia-Pacific share index outside Japan rose 0.6% with Hong Kong and Seoul all recording similar gains.

This index has reached its highest level since March 4, when it climbed 2.5% to reach a 2-month high. The moves are a result of a 1.1% gain for the Nasdaq and almost 2% for Nasdaq overnight trade.

As investors waited for the Federal Reserve’s more aggressive approach in taming inflation, bond markets retreated. In March, two-year Treasury yields increased by 76 basis point (bps), while 10-year yields rose nearly 60 bps to 2.454%. It is the highest levels since 2019.

After Fed Chair Jerome Powell raised the possibility for larger-than-usual rate increases, this selloff that began several months ago gained momentum. The rates-sensitive Japanese yen fell to 121.41 dollars on Wednesday, a six-year-low.

Jan Nevruzi (NatWest Markets rate strategist) stated that “the move higher in yields over the past week has been the greatest one since the global economic crisis, and even then they were just a few basis point of what we are currently experiencing.”

“The market may start pricing in an economy downturn when the Fed starts a series 50-bp rises.

Investors have for the moment been impressed by U.S. economy strength – even with headwinds from inflation and war – and they are betting that businesses with high cashflows will hold their ground.

George Boubouras from K2 Asset Management in Melbourne said, “Big Tech, with growing revenue and ability to reduce costs is doing well.”

Tencent, tech giant and a global leader in technology Alibaba (NYSE:) The tech index grew by over 3% thanks to Meituan, a food-delivery company.

Although bonds in Asia were still under pressure, selling volume slowed down a bit on Wednesday. Australian government 10-year bond yields rose by 3.5 bps, to 2.776%. Japanese 10-year yields edged higher to 0.222%.

As the currency market was dominated by high oil prices and widening policy gaps between Japan and other parts of the globe, analysts didn’t see much hope that the yen would reverse its fortunes.

The Australian dollar has gained 6% over the Japanese yen in one week.

An overall softening U.S. currency helped to push the and to their highest levels against the greenback since November last year, when the Aussie hit $0.7477 while the kiwi reached $0.6973.

Euro held steady at $1.1031.

Futures rose 0.5% to $116.13 per barrel, while they were up 0.6% at $107.23.

Supply concerns continued to support grains.