Asian shares rose to record highs on Friday, with Japan's Nikkei hitting a three-decade peak as investors looked beyond rising coronavirus cases and political unrest in the US to focus on hopes for an economic recovery later in the year.
The upbeat mood came after Wall Street hit record highs on Thursday while bond prices fell as markets bet a new Democratic-controlled government would lead to heavy spending and borrowing to support the US economic recovery.
"Market participants are fairly optimistic with how things are progressing, whether it's in the political landscape, particularly of course in the United States the potential for more stimulus certainly is a boon to the economy," said James Tao, analyst at CommSec in Sydney. "You've got the vaccines now coming through, getting the approvals - it's all happening pretty quickly," he added.
The buoyant mood lifted MSCI's broadest index of Asia-Pacific shares outside Japan up 1 per cent, touching a record high.
Seoul's Kospi led the way, charging 2.8 per cent higher, also to a record high. In Tokyo, the Nikkei added 1.73 per cent, hitting its highest level since August 1990.
Hong Kong's Hang Seng rose 1.2 per cent despite reports the Trump administration was considering banning US entities from investing in an expanded list of Chinese companies in the waning days of the presidency, and despite the delisting of major Chinese telecoms firms from FTSE Russell and MSCI indexes.
Chinese blue-chip shares were flat after recent gains and Australia's S&P/ASX 200 rose only 0.48 per cent after the state of Queensland enforced a three-day lockdown in its capital Brisbane following the discovery of a case of the more contagious UK variant of Covid-19.
On Thursday, the Dow Jones Industrial Average rose 0.69 per cent, the S&P 500 gained 1.48 per cent and the Nasdaq Composite added 2.56 per cent with all three indexes finishing at record closing highs.
The gains follow expectations that Democratic control of both US houses of Congress will help the party of President-elect Joe Biden push through larger fiscal stimulus and comes despite political unrest in Washington DC.
US government officials have begun weighing removing President Donald Trump from office before Biden's inauguration date of January 20, after Trump supporters stormed the US Capitol building.
Rising risk appetite weighed on bonds, pushing benchmark US yields higher. Ten-year notes yielded 1.0998 per cent on Friday, up from 1.017 per cent on Thursday. The 30-year bond yielded 1.8817 per cent, up from 1.845 per cent Thursday.
The dollar also strengthened on hopes of a meaningful economic recovery later this year.
The dollar index edged up against a basket of currencies to 89.875 with the euro down 0.11 per cent to $1.2256.
The greenback was up by a hair against the yen to 103.84.
"We're sure to see a synchronised global recovery in the second half of this year," said ING analyst Carsten Brzeski.
"Right now, there's lots of concern about the virus and noise surrounding the vaccine. But we need to take a slightly longer view."
Cryptocurrency bitcoin fared less well, dropping more than 5 per cent to $37,377 after topping $40,000 for the first time on Thursday on high demand from institutional and retail investors. Market watchers have said a pullback is likely following its recent run-up.
In commodity markets, oil traders continued to focus on Saudi Arabia's pledge to deepen production cuts.
Brent crude was up 0.26 per cent at $54.52 a barrel after touching $54.90, a high not seen since before the first Covid-19 lockdowns in the West. US West Texas Intermediate (WTI) rose 0.26 per cent to $50.96 at 8:39am UAE time. Spot gold was about 0.1 per cent lower at $1,910.87 per ounce.
