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Asia’s Markets Ride Wall Street’s Wave But Covid Fears Persist
US inflation data, interest rate decisions in several major economies and Chinese second-quarter growth figures will be released this week.

A limited loosening of monetary policy by China’s central bank provided an added boost for the region’s markets on Monday, ahead of some big inflation, interest rate and growth numbers coming out this week

 

Asian markets rallied on Monday, recovering from last week’s volatility and buoyed by another record performance on Wall Street, though fears over the fast-spreading Delta variant continued to distract traders.

A decision by China’s central bank to loosen monetary policy slightly for lenders also provided a boost, while eyes will be on a string of big events this week, including US inflation data, interest rate decisions in several countries and Chinese second-quarter growth figures.

Federal Reserve boss Jerome Powell will also be delivering a policy report to US lawmakers, which will be closely watched for an idea about its plans in light of the economy’s strong recovery and spiking virus cases.

 

Also on AF: Data ‘customs hub’ planned in China’s Greater Bay area

 

Meanwhile, the corporate earnings season will be kicked off in earnest by big US banks including Bank of America, Goldman Sachs and JPMorgan.

All three main US indexes ended Friday at new peaks thanks to optimism that the global rebound will press on into next year despite worries that vaccines are not being rolled out quick enough in parts of the world as the Delta variant spreads.

Asia took up the baton and Tokyo jumped more than 2%, while Shanghai, Hong Kong, Sydney, Seoul, Singapore, Taipei, Mumbai, Manila, Jakarta and Wellington were also well up.

Hong Kong’s Hang Seng Index added 0.62%, or 170.70 points, to 27,515.24. The benchmark Shanghai Composite Index jumped 0.67%, or 23.75 points, to 3,547.84, while the Shenzhen Composite Index on China’s second exchange climbed 1.98%, or 48.30 points, to 2,485.15.

 

TAPERING FEARS

The Nikkei 225 rose 2.25%, or 628.60 points, to 28,569.02, while the broader Topix index gained 2.14%, or 40.95 points, to 1,953.33.

However, analysts were worried that investors may be getting a little over-reliant on the ultra-loose monetary policies of central banks.

“Unfortunately, it has to be recognised that going forward, the longer that rates remain where they are, the more that we look towards tapering, the more severe and acute could be the reaction,” Simon Ballard, of First Abu Dhabi Bank, told Bloomberg TV.

There was some cheer from news that the People’s Bank of China had cut the amount of cash banks must keep in reserve, which it said would loosen about $154 billion into the world’s number two economy.

 

US SANCTIONS

“Though a move has been flagged earlier in the week by the reports of China’s State Council urging just such a cut, the timing and extent was earlier and more aggressive than generally anticipated,” said National Australia Bank’s Ray Attrill.

Investors will be keeping tabs on China-US ties after Washington announced sanctions against 34 companies and other entities involved with China’s military and policy towards the Uyghur Muslim minority, and for facilitating exports to Russia and Iran.

Oil prices retreated, following a two-day advance, on concerns that new virus spikes could dent demand for the commodity as governments are forced to impose containment measures.

 

MARKETS

Tokyo – Nikkei 225: UP 2.3% at 28,569.02 (close)

Hong Kong – Hang Seng Index: UP 0.6% at 27,515.24 (close)

Shanghai – Composite: UP 0.7% at 3,547.84 (close)

New York – DOW: UP 1.3% at 34,870.16 (close)

 

  • Reporting by AFP

 

Read more:

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Sean OMeara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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