© Reuters. FILE PHOTO: People wearing protective masks, in the midst of the outbreak of coronavirus (COVID-19), are reflected on an electronic board showing Japan’s stock prices outside a brokerage house in Tokyo, Japan, October 5, 2021. REUTERS / Kim Kyung-Hoon
By Alun John
HONG KONG (Reuters) – Asian stocks and European futures fell on Friday as traders shied away from riskier assets amid renewed concern over COVID-1[ads1]9 and caution ahead of key US inflation data, which also kept currencies in check.
MSCI’s broadest index for Asia-Pacific equities outside Japan lost 0.6%, took three days to rise and fell 0.5%.
In early European trade, the pan-region fell 0.53% and futures lost 0.46%
Equities and risk-averse currencies had performed well earlier in the week, with MSCI’s regional benchmark index publishing its best day of two months on Tuesday, helped by indications that the Omicron strain of the new coronavirus may not be as economically disruptive as first feared.
Despite Friday’s fall, the index is still up 1.7% this week.
However, “as we near the end of the week we got the fact that Europe was much more clearly moving into a kind of lockdown lite, and COVID-19 case numbers in the US are starting to scrape things up a bit,” said Rob Carnell, research leader Asia Pacific at ING.
“There’s also a slight sense of ‘let’s not have too much risk on the table for the weekend.’ he added.
The US Consumer Price Index (CPI) for November comes later on Friday, and a Reuters survey of economists expects it to have risen 6.8% year-on-year, surpassing a 6.2% increase in October, which was the fastest increase in 31 years.
Any upside surprise is likely to be interpreted as a case for a faster downsizing of the Fed and raising expectations of interest rate hikes.
Elsewhere, shares of China Evergrande Group lost 1.5% after Fitch downgraded it to limited standard status.
However, the infection was limited, and an index that tracks developers on the Chinese mainland listed in Hong Kong fell only 0.36%, surpassing the local benchmark index of 0.66%.
More generally, markets are much less concerned about the latest developments in the long-running Evergrande saga than a few months ago.
“This case has been going on for two and a half months now, and the markets do not seem to be as uneasy because a default on Evergrande’s offshore debt has seemed highly likely,” said Shane Oliver, head of investment strategy at AMP (OTC 🙂 Capital.
Also in China, the central bank on Thursday asked financial institutions to keep more currency in reserve for the second time this year, which the markets interpreted as an attempt to slow down a recent rapid strengthening of the yuan.
As a result, the yuan lost about half a percent in offshore trading on Thursday. It was volatile on Friday and last set at 6.3697.
Other currency movements were curbed. The company stayed ahead of the CPI data, and was heading for its seventh weekly increase in a row, the longest since mid-2014.
The euro also took a breather after jumping 0.7% on Wednesday, in line with a generally risk-averse mood, before falling 0.4% on Thursday as sentiment began to turn.
The risk-off tilt led to longer-term yields on US government bonds falling slightly overnight before stabilizing. Benchmark was last at 1.4888%.
The two-year interest rate remained high at 0.7086%.
Oil also lost ground on Friday, but like stocks were heading for a weekly rise. fell 0.14% to $ 70.84 a barrel. fell 0.2% to $ 74.27. [O/R]
However, gold went higher. The spot price rose 0.16% to $ 1,777.3 per ounce. [GOL/]