© Reuters. FILE PHOTO: A person walks previous a inventory citation board at a brokerage in Tokyo, Japan February 26, 2021. REUTERS/Kim Kyung-Hoon
By Wayne Cole
SYDNEY (Reuters) – Asian share markets fell and oil prices slid on Monday as surging Omicron COVID-19 circumstances triggered tighter curbs in Europe and threatened to swamp the worldwide economic system into the New Year.
Beijing lightened the temper a bit by reducing one-year mortgage charges for the frost time in 20 months, although some had hoped for an easing in five-year charges as effectively.
Chinese blue chips nonetheless dipped 0.4%, whereas MSCI’s index of Asia-Pacific shares exterior Japan fell 0.8%. dropped 1.7% and South Korean shares 1.2%.
shed 0.8% and Nasdaq futures virtually 1%. EUROSTOXX 50 futures misplaced 1.1% and futures 1.0%.
The unfold of Omicron noticed the Netherlands go into lockdown on Sunday and put stress on others to observe, although the United States appeared set to stay open.
“Omicron is ready to be the Grinch who stole Europe’s Christmas,” stated Tapas Strickland, a director of economics at NAB. “With Omicron circumstances doubling each 1.5-3 days, the potential for hospital techniques to be overwhelmed even with efficient vaccines stays.”
While coronavirus restrictions cloud the outlook for financial progress, additionally they danger maintaining inflation elevated and turning central banks but extra hawkish.
It was notable that Federal Reserve officers had been overtly speaking of climbing charges as quickly as March and of beginning to run down the central financial institution’s steadiness sheet in mid-2022.
That is much more drastic than implied by futures, which had been effectively forward of Fed intentions till now. The market has solely priced in a 40% probability of a hike in March, with June nonetheless the favoured month for elevate off.
Such hawkish chatter from the Fed is a significant motive why long-dated Treasury yields fell final week as the short-end rose. That left the two-10 yr curve close to its flattest since late 2020, reflecting the chance that tighter coverage will result in recession.
BofA economists see this danger as motive to be bearish on equities, although their newest survey of fund managers discovered simply 6% anticipated recession subsequent yr and solely 13% had been underweight on shares. Most stay obese on know-how, with “lengthy tech” nonetheless seen as the only most crowded commerce.
They additionally famous that for 2021, the winners had been oil with a achieve of 48%, REITs at 42%, Nasdaq at 25% and banks with a 21% achieve. Losers included biotech with a drop of twenty-two%, whereas China additionally misplaced 22%, silver 19% and JGBs 10%.
It was one of the best yr for commodities since 1996, and the worst for international authorities bonds since 1949.
Early Monday, yields on U.S. 10-year notes had been down at 1.38% and effectively beneath their 2021 high of 1.776%.
The Fed’s hawkish flip, mixed with safe-haven flows, underpinned the close to its finest for the yr at 96.674, following a 0.7% bounce on Friday.
The euro was languishing at $1.1237, having shed 0.8% on Friday to threaten its low for the yr at $1.1184. The Japanese yen has protected haven standing of its personal and held regular at 113.49 per greenback.
Sterling was down at $1.3224 as Omicron worries erased all of the positive factors made following the Bank of England’s shock price rise final week.
Gold was trying firmer at $1,801 an oz., having damaged a five-week dropping streak final week as equities slipped.
Oil prices swung decrease amid considerations the unfold of the Omicron variant would crimp demand for gas and indicators of enhancing provide. [O/R]
fell $1.66 to $71.86 a barrel, whereas misplaced $1.44 to $69.42 per barrel.