Asian stocks bounce from the lowest year, but Omicron, Fed in focus

HONG KONG, December 1 (Reuters) – Asian stocks rose from a one-year low on Wednesday as US stock futures and oil recovered from the previous day’s sales, but uncertainty surrounding the impact of the Omicron coronavirus variant kept investors on edge.

US government bond yields rose, supporting the dollar after US Federal Reserve Chairman Jerome Powell was close to indicating overnight that the central bank will increase the pace of its asset purchases at the meeting later this month.

“Right now, the market focus has been on Omicron and the potential that could disrupt the world, but the real focus should be on the Fed and interest rate policy. It’s the biggest shock that has come out of the last day or so,” said Kerry Craig global marketing strategist at JPMorgan Asset Management.

Sign up now for FREE unlimited access to

MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) rose 0.6%, as traders felt that Tuesday’s fall, which sent the benchmark index to its lowest since November 2020, had gone a bit far. The winnings were largely shared across the region.

Japanese Nikkei (.N225) rose 0.7%, also helped by a rise in factory activity, while US S&P 500 futures rose 0.6% and Nasdaq futures rose 0.7% as sentiment reversed after the Dow Jones Industrial Average (. DJI), S&P 500 (.SPX) and Nasdaq Composite (.IXIC) had all closed down over 1.5%.

Powell said that in December, US Federal Reserve will discuss whether to close bond purchases a few months earlier than expected, indicating a strong economy, halted labor force growth and high inflation, which is expected to last into mid-2022.

This pushed up US government interest rates, especially at the short end of the curve. The yield on two-year banknotes, which reflects short-term interest rate expectations, was last at 0.6025%. It was up from as low as 0.4410% on Tuesday, when traders speculated that the new variant could lead to a more pigeon-like Fed.

Benchmark 10-year banknotes were also sold, last yielding 1.4919%, up from Tuesday’s low of two and a half months at 1.4443%.

Rising interest rates led the dollar to stabilize against most peers and gain ground in the Japanese currency, rising to 113.4 yen. FRX

The potential for the Omicron variant to slow the pace of Fed downsizing had limited the dollar’s safe haven status in the days since news of the new strain emerged last Friday.

The Australian dollar disappeared near a one-year low of 0.7138 dollars as the stronger dollar meant that it stayed away from gains from other typically risk-averse assets such as Asian equities.

Oil reacted more strongly and prices recovered after sharp falls in the previous session, ahead of a meeting of the Organization of the Petroleum Exporting Countries (OPEC).

US West Texas Intermediate (WTI) crude oil futures rose 1.9%, to $ 67.43 a barrel. Brent oil futures increased by 2.22%, to $ 70.78 per barrel.

However, there is still a lot of uncertainty surrounding the COVID outlook, and governments, researchers and investors are trying to determine how much protection current vaccines will offer against Omicron.

Gold, despite all the excitement, saw little demand for safe haven with the spot price of $ 1,776 per ounce, up 0.16% and largely within the latter range.

(This story was re-archived to correct the spelling of Omicron in the headline.)

Sign up now for FREE unlimited access to

Reporting by Alun John; editing by Richard Pullin

Our standards: Thomson Reuters Trust Principles.

Source link

Back to top button