Asian markets track fresh Wall St records on recovery optimism

HONG KONG: Asian equities rose with oil prices Wednesday, building on strong gains in Europe and Wall Street as investors were buoyed by optimism over a strong economic recovery despite fears over rising virus cases around the world.

Vaccine optimism was also given an extra boost after Modern said its drug produced protection against the Delta strain that has spread rapidly around the world and accounts for an increasing number of new infections.

Traders were given a healthy lead from their US counterparts after the S&P 500 and Nasdaq again finished at records in New York as data showed US consumer confidence surged in June to its highest pandemic-era level.

The Conference Board's monthly report showed Americans increasingly upbeat about the economy and their job prospects, putting aside worries over rising prices.

"Low virus transmission, vaccinations, and expanded reopenings made consumers much more confident," Oren Klachkin of Oxford Economics said. "Consumers are coming out of their shell."

The positive mood bodes well for other key data this week including on factory and services activity, with the crucial June jobs report -- which will give an up-to-date snapshot of the world's biggest economy -- due on Friday.

The advance in New York, which was mirrored in Europe, flowed through to Asia. Hong Kong, Shanghai, Sydney, Seoul, Singapore, Taipei and Jakarta were all up, while Tokyo and Wellington were flat.

There was little movement in response to data out of China showing growth in the country's manufacturing sector inched down marginally but officials warned over supply shortages of chips and commodities.

Still, while the broad outlook is upbeat, traders are still keeping an eye on the spread of the more transmissible Delta variant, which began in India and is sending infection rates soaring, forcing some governments -- from Australia and Asia to Europe and South America -- to impose new lockdowns.

Nevertheless, analysts said a resurgent virus is unlikely to temper the global rally, given the broad success of vaccine rollouts in much of the world.

"The fight against Covid-19 is far from over, but optimism abounds so much that the global economy is temporarily overheating as a consequence," Sebastien Galy, at Nordea Investment Funds SA, said.

"The environment in the third quarter should still be supportive for risky assets, though fear of bouts of persistent inflation could alter this scenario. We expect to see bouts of volatility from this."

Oil prices pressed higher as demand expectations continue to improve as vaccines are rolled out and, despite the latest virus spikes, economies gear up for a strong recovery.

Both main contracts are sitting around multi-year highs, helped by an American Petroleum Institute report that US stockpiles had fallen last week, with eyes now on Thursday's meeting of OPEC and other key producers.

"We expect consumption to continue outstripping supply in the near term," Howie Lee, at Oversea-Chinese Banking Corp, said. "With more people getting vaccinated, demand worries driven by the virus should continue to diminish."