• Traders cheered by forecast-beating results from Verizon and Coca-Cola
• Biden looked to temper worries about federal tightening again
Asian markets rallied on Thursday as worries about the Delta variant were overshadowed by strong earnings reports hinting firms were emerging robustly from last year’s pandemic-induced collapse.
After a painful start to the week, investors were back in the saddle as Wall Street and Europe enjoyed back-to-back rallies thanks to that optimism – and despite surging infections that have forced some governments to reimpose lockdowns or other containment measures.
Confidence in the long-term recovery has been fortified by data showing that while fully vaccinated people have been infected with the new strain of Covid – such as in the United States and Britain – hospitalisation and death rates among them have remained relatively low, suggesting the drugs are working.
US traders were cheered by forecast-beating earnings from Verizon and Coca-Cola, while United Airlines predicted profits down the line despite Covid-curtailed travel.
Observers said about 85% of US firms that have reported so far have beaten expectations.
“Earnings estimates are quite remarkable, probably some of the best on record,” David Mazza, at Direxion, told Bloomberg Television. “Even through all this, we have central bank liquidity remaining very abundant, economic growth being robust.
“Certainly there are some question marks around how long that can continue, but for the time being momentum is at investors’ back.”
All three main indexes in New York enjoyed healthy gains. And Asia extended the rally, with Hong Kong leading the way by climbing 1.8%, while Sydney, Singapore, Seoul, Mumbai, Jakarta and Manila also put on more than 1%. There were also gains in Shanghai, Wellington and Bangkok. Tokyo was closed for a holiday.
The Hang Seng Index rose 1.83%, or 499.26 points, to 27,723.84. The benchmark Shanghai Composite Index gained 0.34%, or 12.07 points, to 3,574.73, while the Shenzhen Composite Index on China’s second exchange put on 0.45%, or 11.32 points, to 2,503.85.
However, analysts warned the earnings reports had also shown that inflation remained an issue, with some saying price pressures were higher and longer-lasting than foreseen.
A long-running concern on trading floors is that an extended period of high price rises will force the Federal Reserve to tighten monetary policy earlier than thought, though the central bank has persistently denied it would act too soon.
“The key uncertainty for inflation though is whether these cost pressures are persistent and whether they are passed on to retail prices,” Strickland said.
Joe Biden looked to temper any worries again on Wednesday, telling a CNN town hall gathering “there will be near-term inflation” owing to the healthy economic recovery. But he added that most experts thought “it’s highly unlikely that it’s going to be long-term inflation that’s going to get out of hand”.
Oil prices dipped slightly after rallying more than 4% on Wednesday, helping wipe out almost all Monday’s hefty losses, as demand optimism was boosted by news from the Energy Information Administration that stockpiles had fallen last week.
Bitcoin was hovering above $32,000, having recovered back above the $30,000 level it lost this week, helped by comments from tycoon Elon Musk, who said his SpaceX firm had investments in the cryptocurrency and he expected Tesla to resume sales in the unit again as “mining” becomes less environmentally harmful.
Hong Kong – Hang Seng Index: UP 1.8% at 27,723.84 (close)
Shanghai – Composite: UP 0.3% at 3,574.73 (close)
Tokyo – Nikkei 225: Closed for a holiday
New York – Dow: UP 0.8% at 34,798.00 (close)
- Reporting by AFP