Asian stocks staged a recovery on Tuesday as the bargain hunters moved in after Monday’s worldwide retreat, though traders remained distracted by the fast-spreading Omicron coronavirus variant and plans to contain it over the festive period.
Markets have been lashed since the emergence of Omicron as it spreads quickly through populations, forcing governments to impose anti-virus measures that are economically damaging.
The Netherlands has imposed a lockdown over the holiday period, Germany has tightened restrictions notably affecting the unvaccinated, and media speculation has swirled over possible tougher UK curbs.
But there was a boost for the markets with reports that moderate Democratic Senator Joe Manchin could now be willing to discuss US President Joe Biden’s $1.75 trillion social spending bill – having delivered a blow to the White House on Sunday by rejecting it.
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All three main indexes on Wall Street ended down more than 1% on Monday, though they pared early losses and Asia and Europe were on the front foot on Tuesday.
Tokyo added more than 2%, while Hong Kong jumped 1%. There were also healthy gains in Shanghai, Sydney, Seoul, Singapore, Taipei, Wellington, Mumbai, Jakarta and Bangkok. London, Paris and Frankfurt all rose around 1% in opening trade.
The benchmark Nikkei 225 index jumped 2.08%, or 579.78 points, to end at 28,517.59, while the broader Topix index gained 1.47%, or 28.46 points, to 1,969.79.
The Hang Seng Index jumped 1.00%, or 226.47 points, to 22,971.33. The Shanghai Composite Index rose 0.88%, or 31.52 points, to 3,625.13, while the Shenzhen Composite Index on China’s second exchange added 1.05%, or 25.91 points, to 2,504.33.
Crude rose too, with both main contracts rallying after being hammered in recent days by concerns that new Omicron measures will erase demand, with travel curbs already in place in several countries and many people choosing to stay home.
US Borrowing Costs
While the gains are welcomed, OANDA’s Jeffrey Halley warned: “Sentiment remains exceedingly fragile, complicated by rapidly thinning liquidity in asset classes ahead of the holiday season and year-end.
“We are one headline away, be it Omicron or something else, from normal service resuming. December is about V for Volatility and not directional market trends.”
The latest wave of Covid cases comes just as central banks around the world begin to remove the ultra-loose monetary policies put in place at the start of the pandemic to protect economies from the ravages of lockdowns.
The Bank of England announced a surprise rate hike this month, joining a number of others. The Federal Reserve finally gave up on its insistence that inflation would be temporary and announced a faster taper of its vast bond-buying programme.
The US central bank is tipped to lift borrowing costs three times before the end of 2022, bringing the curtain down on the era of cheap cash that has helped fuel a global market rally since the early days of the Covid crisis.
Key figures around 0820 GMT
Tokyo > Nikkei 225: UP 2.1% at 28,517.59 (close)
Hong Kong > Hang Seng Index: UP 1.0% at 22,971.33 (close)
Shanghai > Composite: UP 0.9% at 3,625.13 (close)
London > FTSE 100: UP 1.0% at 7,268.52
New York > Dow: DOWN 1.2% at 34,932.16 (close)
- AFP with additional editing by Sean O’Meara
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