Asian Equities Rise as Bonds Yields Drop, Russia-Ukraine Negotiation Talk in Focus

Asian equities inched up on Wednesday as investors weigh prospect of de-escalation of war and lower yield.

Equites in Mainland China, Hong Kong and South Korea inched up over 1%, while Japan shed loss over 1.5%. The MSCI Asian Index ex Japan is up by 0.90%.

Russia said it sharply call back military activity near Ukraine capital Kyiv and its chief negotiator said Moscow would take steps to “de-escalate” the conflict. The talks failed to reach agreement on a cease-fire, however, and the Pentagon said Kyiv remains under threat.

The rally in equities still remains fragile as various market participants are skeptical about Russia’s intensions. Money markets in the U.S. are pricing in two percentage points of additional interest-rate hikes this year.

Bond yields lowered as positive sentiment grows on de-escalation of the war between Russian and Ukraine. A slide in long-end yields saw the two- to 10-year curve briefly invert — typically a signal of impending recession, though its accuracy is in doubt after years of heavy stimulus.

Philadelphia Fed Bank President Patrick Harker said he expects a series of “deliberate, methodical” rate increases this year, but said he is open to a half-point move in May if near-term data shows more inflation.

Data from U.S. Labor Department on Friday are expected to show the economy probably added close to a half million jobs in March as the unemployment rate fell to 3.7%.

Crude oil pared gains as war risks begins to defuse.

Oil modestly reversed some of its slide as investors remained circumspect about the chances of the war being defused. The WTI is trading around $105 a barrel while Brent is trading around $111 a barrel.