HONG KONG (REUTERS) – Asian stocks were mixed in choppy trading on Thursday (Dec 2) after a sharp reversal on Wall Street on concerns about the spread of the Omicron virus strain.
Also weighing on share markets were remarks from United States Federal Reserve chair Jerome Powell reiterating that the central bank will consider a faster wind-down to its bond-buying programme, a move widely seen as opening the door to earlier interest rates hikes.
This helped support the US dollar which, despite the cautious mood gained ground on the yen, typically seen as an even safer haven than the greenback.
MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.2 per cent, boosted by Chinese blue chips, up 0.25 per cent, and Hong Kong, up 0.2 per cent.
An index of Hong Kong-listed mainland developers rose 2 per cent after news late on Wednesday that Chinese developers plan to sell bonds in China to raise a combined 18 billion yuan (US$2.83 billion), evidence Beijing is marginally easing liquidity strains on the cash-strapped sector.
However, Japan’s Nikkei lost 0.6 per cent and Singapore’s Straits Times Index dropped 0.3 per cent.
Australia’s S&P/ASX 200 Index was down 0.3 per cent but South Korea’s Kospi index rose 0.8 per cent.
All three main Wall Street benchmarks fell more than 1 per cent overnight, as a global rally petered out on negative news about the Omicron variant of the coronavirus.
Omicron is rapidly becoming the dominant variant of the coronavirus in South Africa, less than four weeks after it was first detected there, and on Wednesday the US became the latest country to identify an Omicron case within its borders.
“All that anyone can do at the moment is wait for each headline as it breaks, as there are a series of outstanding questions about the new variant that remain largely unanswered and will remain unanswered for days or weeks,” said IG markets analyst Kyle Rodda.
He added that with the Fed reducing its stimulus and building up to raising rates, “this is the first time in a really long time when markets haven’t taken a bad development as another excuse to buy stocks, expecting an increase in liquidity from the Fed”.
In another sign of a flight to safety, long-dated US Treasury yields slid late in US hours. The yield on 30-year bonds dropped to as low as 1.74 per cent, their lowest since early January, and benchmark 10-year yields dropped to as low as 1.4 per cent – a nine-week low.
Yields at the short end of the curve were steadier on chances that the Fed will speed up its bond purchase tapering.
On Wednesday, in his second day of testimony to Congress, Mr Powell said the Fed needs to be ready to respond to the possibility that inflation may not recede in the second half of next year as most forecasters currently expect.
This would likely lead to an acceleration in the pace at which the Fed tapers its asset purchase programme.
“We now expect the (Fed’s policy committee) to finish asset purchases in April 2022 and start hiking the Funds rate in June 2022,” said analysts at CBA in a morning note.
The dollar index was steady, though the greenback rose around 0.25 per cent to 113 yen, regaining a little of its recent losses, thanks to the hawkish tone.
The risk sensitive Australian dollar languished at US$0.7114, not far from Tuesday’s low of US$0.7063, its weakest since early November of last year.
Oil prices also rebounded, albeit after a strong sell-off in recent days based on fears the new variant will hit travel.
Brent crude futures gained 0.9 per cent to US$69.48 a barrel, and US crude futures gained 0.76 per cent to US$66.08 a barrel though still in sight of Tuesday’s more than three-month low.
Spot gold slid 0.12 per cent to US$1,780 an ounce.