Asia’s markets dipped again on Friday with investors convinced that the US Federal Reserve is poised to start withdrawing the vast financial support put in place at the start of the pandemic.
The fast-spreading Delta virus variant, which is forcing governments to reintroduce containment measures, and the Chinese government’s campaign to tighten its grip on the world’s number two economy, also played on sentiment.
Data on Thursday showed that US producer prices rose more than twice as much as forecast on-month in July, while the annual rate hit a record, reinforcing traders’ belief that the economic bounceback was putting huge pressure on inflation.
Also on AF: China Cranks Up Carbon-Intensive Projects as Climate Crisis Grows
The figures ramped up expectations the Fed, in a bid to prevent overheating, will start reducing its colossal bond-buying programme earlier than it had thought.
“Global investors are assessing the implications of the spread of the Delta virus, the possible tapering by the Fed, and China’s clampdown,” said Geir Lode, of Federated Hermes.
“With equity markets almost doubling since the start of the pandemic and a bull market lasting over a decade, investors are questioning how far the bull market can rally.”
However, while the ultra-cheap borrowing that has been key to propelling the pandemic rally for more than a year looks likely to end, traders remain broadly upbeat, with the Fed – and other central banks – likely to take time withdrawing the support.
LEADERS GATHER
Traders will be keeping a hawk-like eye on Fed boss Jerome Powell’s speech at this month’s gathering of central bank and finance leaders in Jackson Hole, Wyoming.
Wall Street’s three main indexes ended at record highs again on Thursday but Asia struggled to follow suit on Friday.
Tokyo, Hong Kong, Shanghai, Singapore, Seoul, Taipei, Bangkok and Jakarta all fell, with Manila losing more than 3% on fears over a fresh Covid surge in the Philippine capital. Sydney and Wellington rose while Mumbai hit a new record, with the Sensex breaking above 55,000 points for the first time.
The Nikkei 225 index slid 0.14%, or 37.87 points, to end at 27,977.15, while the broader Topix index was up 0.15%, or 2.84 points, at 1,956.39.
CHINA CRACKDOWNS
The Hang Seng Index fell 0.48%, or 126.20 points, to 26,391.62. The Shanghai Composite Index slipped 0.24%, or 8.44 points, to 3,516.30, while the Shenzhen Composite Index on China’s second exchange eased 0.39%, or 9.60 points, to 2,468.74.
As well as Fed-watching, investors are keeping an eye on developments in China after officials said they would put in place tougher anti-monopoly rules and penalties over the next five years, as Beijing looks to tighten the screw further after a recent crackdown on a range of industries.
Tech and private equity firms have already been caught in the crosshairs of leaders, and a statement late on Wednesday indicated finance, public health, and food and drug manufacturing would also be targeted.
Crude prices extended their recent sell-off fuelled by concerns that the Delta mutation that is coursing through the world would slam demand, with the International Energy Agency warning as much in a report on Thursday.
MARKETS
Tokyo – Nikkei 225: DOWN 0.1% at 27,977.15 (close)
Hong Kong – Hang Seng Index: DOWN 0.5% at 26,391.62 (close)
Shanghai – Composite: DOWN 0.2% at 3,516.30 (close)
New York – Dow: UP less than 0.1% at 35,499.85 (close)
- AFP and Sean O’Meara
Read more:
Foxconn Q2 Profit Up Nearly a Third as ‘Covid Boost’ Continues
Baidu On Cloud Nine as Revenues Roll In On Ad Sales, AI Demand
