Asian shares shrugged off caution over the rapidly spreading Delta variant of the coronavirus to advance to one-week highs on Wednesday led by strong US corporate earnings and successful vaccine rollout globally.

Strong corporate profits have eased concerns over the COVID-19 pandemic, as vaccine rollouts continue apace in developed markets, despite a resurgence of cases in Asian countries including China.

While that has helped buoy equities, inflationary pressures and a growing belief the US Federal Reserve may soon signal its intention to trim support to the economy continue to cause a tussle with the bond market over mid-term direction.

“Macro data is coming at high expansionary levels but currently all the market is seeing is peak data. It wants to know what’s going to be the glide path over the next 12 months. Those concerns are playing out in the bond market,” said Grace Peters, EMEA head of investment strategy at J.P. Morgan Private Bank.

“When it comes to the equity markets, you have more balance, as lower yields support equities, especially the growth part of the equity market. At the same time, there is strong bottom-up evidence that life is good for corporates.”

The MSCI World index, a broad gauge of equity markets, was up 0.2 percent in early European trading, tracking overnight gains in Asia, where the equivalent index, excluding Japan, was last up 1 percent.

Japan’s Nikkei was in the red while Chinese shares were quick to turn positive after starting lower. The blue-chip index added 0.7 percent as did Shanghai’s SSE Composite.

Australian shares were a touch firmer, though sentiment was marred by an unabating rise in Delta infections in Sydney, the country’s biggest city. Most other Asian indexes were also higher.

Across Europe, the STOXX Europe 600 and FTSE 100 were both up around 0.5 percent, with the latter supported by strong results from housebuilder Taylor Wimpey and insurer Legal and General.

US stock futures pointed to a quiet open on Wall Street, flat to up 0.1 percent. Close to 90 percent of companies listed on the S&P500 have reported positive earnings surprises for the second quarter, National Australia Bank (NAB) economist Tapas Strickland said.

“Aside from [the] healthy earnings outlook, we also see equities being supported by continued monetary stimulus from the Federal Reserve and the attractiveness of stocks relative to low bond yields,” said Mark Haefele, chief investment officer, UBS Global Wealth Management in a note.

Investors expect volatility to increase in August as more companies report earnings and the market hears from Federal Reserve officials in coming weeks.

While all eyes will be on the latest US nonfarm payroll numbers on Friday — the last before US central bankers convene at Jackson Hole to discuss policy — markets are also set to take a hint from Wednesday’s US ADP employment survey.

Ahead of the data, the US dollar was flat against a basket of currencies while benchmark Treasury yields were up 1 basis point at 1.182 percent.

In commodities, Brent futures added 28 cents to US$72.61 a barrel. US crude rose 7 cents at $70.61 a barrel.

Spot gold was up 0.2 percent to $1,814.2 an ounce.

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