Asia share market edges up as bond yields, resources steal the show

 Japan's Nikkei recouped 1.0% and South Korea 0.4%, while E-Mini futures for the S&P 500 were a fraction firmer

By Wayne Cole

SYDNEY (Reuters) - Asian share markets inched higher on Monday as expectations for faster economic growth and inflation globally batter bonds and boost commodities, though rising real yields also make equity valuations look more stretched in comparison.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.1%, after easing from a record top late last week as the jump in U.S. bond yields unsettled investors.

Japan's Nikkei recouped 1.0% and South Korea 0.4%, while E-Mini futures for the S&P 500 were a fraction firmer.

Bonds have been bruised by the prospect of a stronger economic recovery and yet greater borrowing as President Joe Biden's $1.9 trillion stimulus package progresses.

"Yield curves have continued to steepen, as COVID infection rates decline further, reopening plans are discussed and a large U.S. fiscal stimulus package looks likely," said Christian Keller, Barclays' head of economics research.

"This in principle signals a better medium-term growth outlook for the U.S. and beyond, as other core yields curves are moving in the same direction," he added. "Meanwhile, central banks seem set to look through this year's inflation increase, keeping the curves' front end anchored."

Federal Reserve Chair Jerome Powell delivers his semi-annual testimony before Congress this week and is likely to reiterate a commitment to keeping policy super easy for as long as needed to drive inflation higher.