World Asia markets tumble as rate hike fears take hold
Warren Buffett's Berkshire Hathaway scores $1.4 billion gain on 5 Japanese stocks in under 6 months
Warren Buffett has scored a $US1.4 billion gain on five Japanese stocks. Berkshire Hathaway revealed 5% stakes in the trading houses last August. The stocks have surged 23% since then. Visit Business Insider's homepage for more stories. Warren Buffett's Berkshire Hathaway has scored a $US1.4 billion gain on its surprise investment in five Japanese trading houses. The famed investor's conglomerate disclosed 5% stakes in Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo at the end of August. Berkshire said it purchased the shares during the preceding 12 months.
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 rollout of vaccines, slowing of infections and Joe Biden's impending huge US stimulus are proving to be a double-edged sword for traders as they weigh the much-needed return to pre-pandemic life with the prospect that prices will soar.
Global shares rise, but surging commodities and bond yields feed concern over inflation
Global shares gain, but caution picked up over a possible near-term spike in inflation. US futures eased, pointing to a weaker start to trade later on Wall Street. Oil rose, supported by supply outages in Texas, where a winter storm has knocked out production. Sign up here for our daily newsletter, 10 Things Before the Opening Bell. Global equities rose on Monday, but the mood among investors was cautious, as surging commodity prices and government bond yields continued to fan fears of a damaging rise in inflation, just as the world economy is starting to recover from the impact of COVID-19.
And there is a worry this would threaten one of the key pillars of the rally on world markets from their March nadir -- record-low borrowing costs and a vast bond-buying programme.
Alarm bells have been ringing for weeks as the yield on benchmark 10-year US Treasuries climbed to one-year highs as investors moved out of the safe havens -- yields rise as prices fall -- and on Thursday a better-than-expected read on US jobless claims pushed them up further.
Yields have also advanced in other parts of the world, including Australia, France and Germany.
That sparked a hefty sell-off in New York as all three main indexes tanked -- led by the Nasdaq's 3.5 percent plunge as tech firms are more susceptible to higher interest rates.
And Asia followed suit, with Tokyo, Hong Kong, Sydney, Seoul and Taipei down more than two percent while Shanghai and Singapore shed more than one percent. There were also losses in Wellington and Jakarta.
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.
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.
- Biden's minimum wage blow -
"With the US economic outlook boosted by pandemic improvement, vaccine distribution and the prospects of President Biden's fiscal package getting through Congress, investors are now fixated on the risk of inflation and economic overheating," said Tai Hui, at JP Morgan Asset Management.
"Investors may not be fully convinced by the Federal Reserve's commitment to keep monetary policy loose for an extended period.
"The likely rise in headline inflation, partly due to the low base from 12-months ago, could challenge this dovish view, even though we agree that sustained demand-side inflation pressure is still some quarters away."
Asian equities advance but inflation, correction worries persist
Asian markets rose Wednesday following the previous day's losses but investors remain on guard over a possible correction as concerns about asset bubbles and a surge in inflation continue to play against progress in fighting coronavirus. "If interest rates start moving higher and quicker than expected, then there's a chance there might be more significant pullback in the market," she told Bloomberg TV. Asian investors brushed off a Wall Street retreat to push higher Wednesday, with Hong Kong rallying more than one percent while Shanghai, Singapore, Seoul and Taipei were also in positive territory.
He added that the rise in yields "serves as a trigger to investors who have been looking for a reason for an equity market correction. Volatility will continue but this could provide an interesting opportunity for investors to reload on equities".
And Silvia Dall'Angelo at fund manager Federated Hermes added: "Central banks' liquidity will continue to flow abundantly throughout 2021 at least, yet it's unclear whether markets can ever get enough of it."
In Washington, the House is expected to vote on Biden's enormous economic rescue package later in the day, though his hopes of including a $15-an-hour minimum wage in it were dealt a blow Thursday when an official said it could not be passed using a simple majority in the Senate.
Still, the vast majority of the $1.9 trillion package -- which does include $1,400 cash handouts -- is expected to get through Congress and be signed by the president later in March.
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: DOWN 2.4 percent at 29,446.17 (break)
Hong Kong - Hang Seng: DOWN 2.1 percent at 29,455.12
Shanghai - Composite: DOWN 1.3 percent at 3,539.11
Euro/dollar: UP at $1.2177 from $1.2175 at 2130 GMT
Pound/dollar: DOWN at $1.4010 from $1.4011
Euro/pound: UP at 86.90 pence from 86.89 pence
Dollar/yen: DOWN at 105.91 yen from 106.25 yen
West Texas Intermediate: DOWN 0.6 percent at $63.16 per barrel
Brent North Sea crude: DOWN 0.3 percent at $66.70 per barrel
New York - Dow: DOWN 1.8 percent at 31,402.01 (close)
London - FTSE 100: DOWN 0.1 percent at 6,651.96 (close)
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.