Asia’s markets struggled on Wednesday with traders preoccupied with the impact of surging inflation and likely interest rate hikes across the globe.
While the new Omicron Covid variant continues to spread rapidly around the world, forcing governments to maintain containment measures, its alleged milder symptoms have allowed traders to focus more on future economic policies and plans to rein in surging prices.
The release of minutes from the Federal Reserve’s December rate meeting later on Wednesday will be keenly watched with dealers looking for a clearer idea about officials’ policy plans.
That will be followed by Friday’s jobs data for last month that could play a key role in their next round of deliberations.
Also on AF: China Evergrande Wants 6-Month Delay on Yuan Bond Payments
With the bank due to end its vast bond-buying stimulus programme by March, commentators are speculating about when and how many times the Fed will hike borrowing costs as it tries to overcome inflation running at a pace not seen in decades.
“One of the more dovish Fed members, Neil Kashkari, said he supports two rate increases this year, which might mean pricing in three rate hikes this year might not be enough,” OANDA’s Edward Moya said.
And Steve Englander, at Standard Chartered, added: “Earlier we thought that rate hikes wouldn’t be on the table until mid-2022 but the Fed seems to have worked up a consensus to taper faster and hike sooner rather than later.”
Still, he remained upbeat about the outlook for markets, saying: “But we don’t think inflation dynamics will support continued hiking. We suspect the biggest driver of asset markets will be when inflation and Covid fears begin to ebb.”
After ringing up new record highs on Monday, the S&P 500 fell on Wall Street, while the Nasdaq sank more than 1% as tech firms – which generally rely on debt and low rates to fuel growth – took a hit. However, the Dow edged to a new all-time high.
Hong Kong Hit By Covid Again
Chinese technology firms, which have also been hit by a crackdown from the government, were a big drag on Hong Kong as it sank more than 1%.
Concerns about a new outbreak of Covid in the city that has led to the reimposition of containment measures added to the glum mood. Shanghai, Sydney, Singapore, Seoul, Taipei and Jakarta also fell.
The Hang Seng Index sank 1.64%, or 382.59 points, to 22,907.25. The Shanghai Composite Index fell 1.02%, or 37.15 points, to 3,595.18, and the Shenzhen Composite Index on China’s second exchange lost 1.74%, or 44.01 points, to 2,483.69.
Tokyo, Wellington and Jakarta rose along with Manila, where trading resumed after being cancelled on Tuesday owing to a technical glitch. Tokyo was flat with the yen holding losses at a four-year low against the dollar.
The Nikkei 225 added 0.10%, or 30.37 points, to 29,332.16, while the broader Topix index rose 0.45%, or 9.05 points, at 2,039.27.
China Mobile Briefly Soars
In company news, China Mobile briefly soared around 10% on its debut in Shanghai after the telecoms giant was delisted in New York under a stand-off between Beijing and Washington. It ended only slightly higher, however.
And China’s state-owned debt collector Huarong Asset Management collapsed 50% as trading resumed in Hong Kong after a $6.6 billion state-orchestrated bailout of the embattled company.
Trading was suspended in April after it delayed its annual report, spooking markets. When published in August, the results showed a record $15.9 billion loss for 2020 and outlined a rescue plan.
London barely moved after opening, while Paris and Frankfurt rose.
Key figures around 0820 GMT
Tokyo > Nikkei 225: UP 0.1% at 29,332.16 (close)
Hong Kong > Hang Seng Index: DOWN 1.6% at 22,907.25 (close)
Shanghai > Composite: DOWN 1.0% at 3,595.18 (close)
London > FTSE 100: FLAT at 7,503.68
New York > DOW: UP 0.6% at 36,799.65 (close)
- AFP with additional editing by Sean O’Meara
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