Asian stocks rose amid signs markets are beginning to stabilize after the biggest weekly rout in two years. Japanese equities pared gains as the yen advanced.
Shares in Hong Kong and China led the rally in Asia after the S&P 500 Index posted its biggest two-day advance in 18 months. Japan’s equities retreated from the day’s highs after traders returned from a holiday on Monday, while S&P 500 futures declined. The 10-year Treasury yield was steady after falling back from touching 2.89 percent, and the dollar remained under pressure. West Texas Intermediate oil remained under $60 a barrel.
The Cboe Volatility Index fell, but traders were still on edge following the tumultuous moves last week that wiped $2 trillion from US stocks.
Still, some investors are waiting for another dip in the markets before stepping back in. AMP Capital Investors’ Nader Naeimi — who in September had about 30 percent of holdings in cash — said this is a short-term recovery and there will be another leg down in equities going into the Federal Reserve’s March policy meeting.
“The plan is to buy on the second leg down,” Naeimi, Head of Dynamic Markets in Sydney, told Bloomberg TV. “Usually it’s best to wait for the market to build a base before committing heavily back into buying.”
Morgan Stanley chief US equity strategist Michael Wilson reversed his week-old cautious call, joining peers at Goldman Sachs Group Inc. and JPMorgan Chase & Co. who have told clients to buy the dip.
With investors questioning the outlook for monetary policy, billionaire hedge fund manager Ray Dalio said the risks of a recession in the next 18 to 24 months are rising and that bonds are past their peak. Dalio said the US is further along in the business cycle than he thought and that it’s difficult to make a call on equities.
Investors are eagerly awaiting US consumer-price data due on Wednesday, given that pressure on equities has been emanating from the Treasury market and the outlook for inflation.