Asian traders were in nervous mood on Thursday after strong economic data fuelled expectations that the Federal Reserve will withdraw its vast financial support and lift interest rates sooner than thought.
A drop in jobless claims to a five-decade low, along with a surge in consumer income and spending, reinforced optimism that the United States is well on the recovery track – but added to pressure on the central bank to prevent overheating.
The readings came as minutes from the Fed’s November policy meeting showed officials were moving towards tapering their vast bond-buying programme – known as quantitative easing – at a faster pace as they try to tame rocketing prices.
While officials agreed to lower the number of bonds bought each month from the start of November, the minutes said that “some participants preferred a somewhat faster pace of reductions that would result in an earlier conclusion to net purchases.”
The surge in inflation around the world has led several central banks to tighten the policies put in place at the start of the pandemic that have been a key driver of the global recovery and market rally to record or multi-year highs in the past year and a half.
The latest strong US data do not “speak to an economy in need of the type of support the Fed is currently giving it and add weight to the concerns the Fed is behind the curve when it comes to monetary policy,” Michael Hewson of CMC Markets said.
The S&P 500 and Nasdaq closed on Wednesday with healthy gains ahead of the Thanksgiving break. But the Dow edged slightly lower, and Asia largely followed suit.
Tokyo led gains thanks to a rally in the dollar against the yen that helps exporters – while Wellington, Taipei and Jakarta also edged up.
The Nikkei 225 index added 0.67%, or 196.62 points, to end at 29,499.28, while the broader Topix index advanced 0.33%, or 6.57 points, to 2,025.69.
Shanghai Index Dips
Hong Kong, Sydney, Wellington, Taipei, Mumbai and Jakarta were up, though Shanghai, Singapore, Manila, Bangkok and Seoul were down.
The Hang Seng Index added 0.22%, or 54.66 points, to 24,740.16. The Shanghai Composite Index dipped 0.24%, or 8.52 points, to 3,584.18, while the Shenzhen Composite Index on China’s second exchange eased 0.33%, or 8.25 points, to 2,512.22.
Still, while markets are stuttering, some commentators remain upbeat about the direction going into next year.
“When looking forward to 2022 the market will see a true reopening from the pandemic after the last post-holiday surge, the end of the logistics bottlenecks, and further earnings growth,” analyst Louis Navellier said. “Now is not the time to move to the sidelines. Get ready for a green December.”
Tokyo > Nikkei 225: UP 0.7% at 29,499.28 (close)
Hong Kong > Hang Seng Index: UP 0.2% at 24,740.16 (close)
Shanghai > Composite: DOWN 0.2% at 3,584.18 (close)
New York > Dow: FLAT at 35,804.38 (close)
- AFP with additional editing by Sean O’Meara