Asian stocks set for cautious gains after choppy Wall Street session

NEW YORK (Reuters) – Asian stocks were set to gain on Friday, as global sentiment remained doggedly upbeat despite increased volatility and rising new coronavirus infections, with Wall Street pushed higher by a loosening in bank regulations.

Throwing some cold water on the rally, however, were the U.S. Federal Reserve’s capital limits for banks after its stress tests on the sector revealed key vulnerabilities.

“Futures are pointing to gains, it’s just a question of how they interpret the latest directive from the U.S. Federal Reserve,” said Tom Piotrowski, a markets analyst at Australian broker CommSec. “We could see a flow-on effect of regulators stepping in and making sure banks maintain financial health now that we see the pandemic take on different qualities, with the challenges drawn out over a long period of time.”

The Fed on Thursday said it will cap big bank dividend payments and halt share repurchases until at least the fourth quarter. It found lenders faced significant capital losses when tested against an economic downturn caused by the coronavirus pandemic.

Australian S&P/ASX 200 futures YAPcm1 rose 1.21% in early trading. Japan’s Nikkei 225 futures NKc1 added 0.13%. Hong Kong’s Hang Seng index futures .HSI HSIc1 lost 0.93%. Hong Kong was closed for a public holiday on Thursday and markets in mainland China continue their break on Friday.

MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.45%.

Coronavirus cases across the United States have soared in recent days, with Texas pausing its re-opening as COVID-19 infections and hospitalizations surged in the state.

On Wall Street, the Dow Jones Industrial Average .DJI rose 1.18%, the S&P 500 .SPX gained 1.10% and the Nasdaq Composite .IXIC added 1.09%.

The gains were due in part to earlier announcements from U.S. regulators loosening rules to allow banks to make larger investments in riskier vehicles such as venture capital funds.

“Investors continue to grapple with mostly negative U.S. virus news, which continue to suggest there is an increasing risk reopening plans in the U.S. economy could be reversed,” the National Australia Bank wrote in a research note. “But as we have seen before, news of more supportive measures have yet again propped up the equity market.”

The U.S. dollar strengthened on Thursday due to fears of rising coronavirus cases. The dollar index =USD rose 0.123%.

Oil prices rose about 2% in a volatile session, boosted by signs of a small rise in fuel demand but offset by rising coronavirus cases.

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