© Reuters. FILE PHOTO: A man wearing a protective face mask, after an outbreak of the coronavirus, talks on his mobile phone in front of a screen showing the Nikkei index outside a brokerage house in Tokyo, Japan, February 26, 2020. REUTERS / Athit Perawongmetha / Fil Ph
By Tom Westbrook
SYDNEY (Reuters) – Asian stocks got a soft start to the week on Monday while oil and the euro were under pressure, as the return of COVID-1[ads1]9 restrictions in Europe and talk of accelerated downsizing from the US Federal Reserve put investors on alert.
Oil futures slipped around 1% at the opening, sending up to a seven-week low of $ 78.05 and $ 74.76, respectively, due to concerns about oversupply.
Australian equities fell 0.4%, led by losses on bank shares. was down 0.3% and MSCI’s broadest index for Asia-Pacific equities was flat.
“There are questions about the resilience of Europe and the European economy, exacerbated by protests and infection rates over the weekend,” said Rodrigo Catril, a strategist at the National Australia Bank (OTC) in Sydney.
“It’s hard to see the US dollar hurting that backdrop,” he said, a view further underlined by recent strong US data and hawkish comments from Fed officials.
The euro fell 0.2% to $ 1.1280, near its lowest level in 16 months. The single currency has been the prime mover in the markets in recent sessions, as investors are betting that Europe’s economy is well behind US recovery.
Safe haven assets such as bonds, gold and yen have also benefited from the recent cautious tone in the financial markets.
On Monday, the return on the benchmark index for 10-year US government bonds was stable at 1.5634%. Gold found support at $ 1,845 per ounce. The yen hovered at 114.09 per dollar.
The risk-sensitive Australian dollar also fell to a seven-week low of $ 0.7227. South Korean stocks were a departure as chipmakers followed US companies higher with brighter prospects for demand for memory chips.
rose 0.2 percent after the Wall Street indices fell on Friday.
THE GARDEN PLAYS
Trade is likely to be thinned out this week by Thanksgiving in the US, but the cautious tone is prompting traders to monitor COVID-19 cases in Europe, as well as keep an eye on central bank speakers, especially in the UK and Europe.
Austria began its fourth lockdown on Monday – with neighboring Germany warned it could follow – as protests against restrictions swept across the continent.
Surveys in Europe and the UK during the week are expected to show a downward trend in production and sentiment.
“The combination of COVID, growth and geopolitical concerns in the eurozone supports safe havens,” said Rabobank’s head of currency strategy Jane Foley.
“The recent break below the $ 1.15 level and the downward swing that followed have forced us to lower our currency pair forecasts further,” she added, expecting it to be around $ 1.12 by the middle of next year.
Meanwhile, the US economy has surprised analysts with stronger-than-expected retail sales data and high inflation in recent weeks. The focus this week is on prices and the labor market and on what the Fed can do with their strength.
Fed Deputy Richard Clarida said last week that increasing the pace of downsizing may be worth discussing at the December meeting. Fed minutes come on Wednesday.
China clapped on its reference rates for corporate and household loans for a 19th month on Monday, as expected.
Central banks in South Korea and New Zealand are expected to raise interest rates this week, with swaps markets priced at about a 40% chance of a 50 basis point rate hike in New Zealand.
was under pressure after posting its worst week in two months last week, last sitting at $ 58,180.