Asian markets were stuck in a holding pattern on Wednesday as wary investors waited on the outcome of the Federal Reserve’s latest policy meeting.
Traders are expecting an announcement of a speedier withdrawal of the Fed’s massive financial support just as the Omicron variant fans concerns about the economic recovery.
Pressure is mounting on central banks all around the world to act in order to get a grip on runaway inflation, which has been sent soaring this year by a spike in energy prices, long-running supply chain snags and surging demand.
Data last week showed US consumer prices rose in November at their fastest pace in four decades, all but confirming that the Fed will aim to end its vast bond-buying programme sooner than expected, allowing it to begin lifting interest rates by mid-2022.
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The prospect of the end of central bank largesse – put in place at the start of the pandemic – has been a huge drag on global equity markets for the past few months, bringing an end to a rally that saw many markets hit record or multi-year highs.
The Fed decision later on Wednesday will be followed by the European Central Bank (ECB) and the Bank of England on Thursday.
After a day of selling on Wall Street, led by tech firms that are more susceptible to higher interest rates, Asia mostly fell.
Hong Kong extended its sell-off into a fourth day, while Shanghai was also lower as data indicated China’s economy slowing further last month, with retail sales growth weakening owing to the latest Covid-19 outbreak across the country.
The Hang Seng Index fell 0.91%, or 215.19 points, to 23,420.76. The Shanghai Composite Index slipped 0.38%, or 13.89 points, to 3,647.63, while the Shenzhen Composite Index on China’s second exchange lost 0.58%, or 14.75 points, to 2,543.49.
Omicron Variant Surge
Sydney, Singapore, Wellington, Manila, Mumbai and Bangkok were also in the red, though Tokyo, Seoul, Taipei and Jakarta eked out gains.
The benchmark Nikkei 225 index added 0.10%, or 27.08 points, to end at 28,459.72, while the broader Topix index rose 0.52%, or 10.29 points, to 1,984.10.
London opened slightly lower as data showed UK inflation at a 10-year high. Paris and Frankfurt edged up.
Adding to the downbeat mood is the surge in infections caused by the Omicron coronavirus variant, which has forced governments around the world to reintroduce fresh containment measures, threatening to deal a blow to the already fragile economic rebound.
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The World Health Organization said Africa – where the strain was first recorded – had recorded a massive rise in cases over the past week although it has seen a lower number of deaths compared with previous waves. Still, the WHO urged swift action to rein in transmissions and warned against complacency.
Meanwhile, Pfizer said clinical trials of its Covid-19 pill reduced hospital admissions and deaths among at-risk people by almost 90%.
And there was some good news for traders after US lawmakers finally agreed an 11th-hour deal to lift the debt ceiling, allowing the country to pay its bills and avert a catastrophic default.
Travel between countries has slimmed down to prevent Omicron spreading, but fears about a drop in demand hit oil prices, with both main contracts sharply down from their recent highs hit in October. And they fell further on Wednesday, losing more than 1%.
Key figures around 0820 GMT
Tokyo > Nikkei 225: UP 0.1% at 28,459.72 (close)
Hong Kong > Hang Seng Index: DOWN 0.9% at 23,420.76 (close)
Shanghai > Composite: DOWN 0.4% at 3647.63 (close)
London > FTSE 100: DOWN 0.1% at 7,214.61
New York > Dow: DOWN 0.3% at 35,544.18 (close)
- AFP with additional editing by Sean O’Meara
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