World Asia markets swing as reopening optimism battles inflation fear
Europe less at risk of inflation and rate fears: analysts
Investors are watching inflation carefully, worried that a boiling over of prices will ruin the expected strong pandemic recovery although analysts believe Europe faces much less of a risk than the United States. "We have a European recovery programme considerably less strong, and a loss of growth that is much greater, so there aren't the same risks of overheating as in the United States," said Fabien Tripier, an economist at CEPII, a Paris-based research centre on the world economy.The US economy shrank 3.5 percent last year while the drop for the eurozone was nearly double that.
Asian markets fluctuated Tuesday, with growing optimism that the rollout of vaccines will allow the global economy to get back on track offset by niggling worries that the recovery will fan inflation and lead to a hike in interest rates.
With governments picking up the pace in their inoculation drives, and infection and death rates slowing in most parts of the world, observers are predicting a surge in economic activity from the middle of the year as lockdowns are eased.
Asian markets mixed as inflation fears play against recovery hopes
Asian markets were mixed Thursday on profit-taking and growing worries about inflation, which offset long-running optimism about the global recovery as vaccines are rolled out, infection rates slow and Joe Biden's stimulus winds through Congress. Oil prices pushed further up to 13-month highs as the severe cold snap in the United States hammers production, even trumping news that Saudi Arabia is planning to up output in light of the commodity'sOil prices pushed further up to 13-month highs as the severe cold snap in the United States hammers production, even trumping news that Saudi Arabia is planning to up output in light of the commodity's strong performance in recent months.
Added to that is Joe Biden's huge growth-boosting spending programme, which is likely to be passed by Congress next month, on top of the Federal Reserve's pledge to keep monetary policy ultra-loose for as long as needed.
Monumental government and central bank support worth trillions of dollars has been a key driver of the surge in world equities from their nadir almost a year ago when the coronavirus was rampaging across the planet.
But while the mood is increasingly good, investors are turning their focus to the impact of the reflation -- a rally in prices as people go back to shops and restaurants or start going on holiday again.
Expectations that inflation will spike has seen US 10-year Treasury yields rally to a one-year high, and that has spooked investors who fear that means interest rates will go up in turn.
Asian markets drop as rate fears trump Powell reassurances
Asian markets suffered fresh losses Wednesday as concerns about rising inflation and frothy equity prices continued to sap confidence, with investors unmoved by reassurances from Federal Reserve boss Jerome Powell that officials would maintain record-low interest rates for as long as needed. He pledged to keep the bank's vast bond-buying scheme and low rates in place "until substantial further progress has been made toward our goals" of twoGlobal stock indexes have cruised to all-time or multi-year highs in recent months thanks to government and central bank backing, the rollout of vaccines, easing of lockdowns, Joe Biden's imminent stimulus and falling infection rates.
Technology firms, which have outperformed as they benefit from people being forced to stay home, have been worst hit, while those likely to do well as economies reopen are enjoying much-needed buying interest.
- Focus on Fed's Powell -
"Investors are quickly rediscovering that not all stocks are created equal in a Covid recovery as expensive tech names (are sold) to provide the source of funds for less expensive travel-related markers, along with energy and other inflation beneficiaries," said Axi strategist Stephen Innes.
The play-off between recovery and inflation worries has brought a rally in world markets to a halt in recent weeks, after some had hit record or multi-year highs.
The tech-rich Nasdaq tumbled more than two percent Monday, while the S&P 500 was also in the red, though the Dow eked out gains.
And Asian investors trod warily. Hong Kong, Shanghai, Sydney, Singapore and Jakarta were all up but Seoul, Wellington, Taipei and Manila fell. Tokyo was closed for a holiday.
Asia markets tumble as rate hike fears take hold
Equity markets suffered another sell-off Friday on fears that an expected strong global economic recovery this year will fan inflation and force central banks to hike interest rates, despite reassurances that ultra-loose monetary policies will be kept in place for as long as needed. The selling comes despite constant reassurances from Federal Reserve officials, led by boss Jerome Powell, that they are not worried about inflation and the rise in Treasury yields is a sign that the economic outlook is bright -- and rates will not rise for the foreseeable future.
Crucial catalysts to drive stocks higher "may be fading as markets come to terms with the next phase of the recovery", said Chris Iggo at AXA Investment Managers. "I wouldn't be surprised if market returns are more volatile in the coming months."
Traders are keenly awaiting Fed boss Jerome Powell's congressional testimony from Tuesday, looking for an idea about the bank's thinking on the rising yields and their effect on policy, particularly interest rates.
Video: Spending, stimulus suggest strong economic rebound for 2021 (CNBC)
But OANDA's Edward Moya said Powell will likely reaffirm his commitment to seeing employment recover and inflation remain elevated.
"The path of rates won't change this year, with the earliest that some economists see a potential move up in rates being next January," he said.
"Since financial conditions are tightening and with wage pressures remaining nonexistent, that should keep inflation fears from getting out of control.
"The economic data has been improving but remains inconsistent and that is all Powell needs to keep his ultra-accommodative stance."
Oil prices continued their march higher, piling on more than one percent a day after clocking up gains of almost four percent, on demand optimism as the world emerges from lockdown.
- Key figures around 0240 GMT -
Hong Kong - Hang Seng: UP 1.2 percent at 30,674.98
Shanghai - Composite: UP 0.3 percent at 3,654.19
Tokyo - Nikkei 225: Closed for a holiday
Pound/dollar: UP at $1.4079 from $1.4064 at 2145 GMT
Euro/dollar: UP at $1.2176 from $1.2161
Euro/pound: UP at 86.47 pence from 86.44 pence
Dollar/yen: DOWN at 104.97 yen from 105.07 yen
West Texas Intermediate: UP 1.5 percent at $62.60 per barrel
Brent North Sea crude: UP 1.7 percent at $66.33 per barrel
New York - Dow: UP 0.1 percent at 31,521.69 (close)
London - FTSE 100: DOWN 0.2 percent at 6,612.24 (close)
-- Bloomberg News contributed to this story --
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