• Fears US inflation data could spark Fed reaction and pandemic support cooling
• But investors boosted by progress on President Biden’s $1.2 trillion spending bill
Asia’s major markets all made minor advances on Wednesday as investors monitored the continuing impact of the fast-spreading Delta variant – and remained on the lookout too for any signs the Federal Reserve is set to pull back its pandemic financial support.
News that US President Joe Biden’s $1.2 trillion infrastructure spending bill had finally passed the Senate provided some cheer, though analysts said it could still be some time before it gets final approval.
Equities have seen a largely positive start to the week after a recent run of pressure caused by profit-taking – many markets were sitting around record or multi-year highs – and concerns about China’s crackdown on sectors including tech and private tuition.
But the key driver of unease has been the surge in new infections of the Delta Covid mutation, which has forced a number of governments around the world to reimpose lockdowns and other containment measures.
Still, investors remain largely upbeat that the world economy will eventually ride the disease out, even if it does take the recovery longer than initially hoped.
“There’s clearly more focus and concern on the Delta variant of Covid but markets have appraised that as a manageable risk,” David Donabedian, of CIBC Private Wealth Management, said. “The market is climbing the wall of worry.”
Hong Kong, Tokyo, Shanghai, Sydney and Manila rose but Singapore, Seoul, Wellington, Taipei, Mumbai and Bangkok fell. That came after the Dow and S&P 500 ended at new record highs.
The Hang Seng Index added 0.2%, or 54.54 points, to 26,660.16. The Shanghai Composite Index edged up 0.08%, or 2.69 points, to 3,532.62, while the Shenzhen Composite Index on China’s second exchange ticked 0.13%, or 3.21 points, up 2,487.00.
Tokyo’s benchmark Nikkei 225 index rose 0.65%, or 182.36 points, to end at 28,070.51, while the broader Topix index gained 0.92%, or 17.80 points to 1,954.08.
Eyes were also firmly on the impending release later on Wednesday of US July inflation data, which could have a bearing on the Fed’s decision over when to start tapering the vast bond-buying programme that has been a major pillar of support for global markets since April last year.
Soaring prices in recent months and blockbuster job numbers in June and July have ramped up pressure on the bank to tighten policy in order to prevent the economy from overheating.
“While the Fed may well still be able to argue the continued rise in prices is transitory… if June’s number doesn’t mark the high-water mark, then Fed officials may start to shift a little bit more uncomfortably as we head into the autumn,” CMC Markets analyst Michael Hewson said.
Tokyo – Nikkei 225: UP 0.7% at 28,707.51 (close)
Hong Kong – Hang Seng Index: UP 0.2% at 26,660.16 (close)
Shanghai – Composite: UP 0.1% at 3,532.62 (close)
New York – Dow: UP 0.5% at 35,264.67 (close)
- AFP and Sean O’Meara