Asian markets swing as traders weigh Fed tightening, inflation

Asian markets mostly up as traders edge back after rout

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Hong Kong: Due to concerns about the impact of Omicron on the global recovery, Asian investors began to return to the market after two consecutive days of selling, while oil continued to rebound, but uncertainty continued to hang over the trading floor.

The gains followed an advance on Wall Street and Europe, which started the week by making some inroads into Friday’s worldwide rout that came on the back of news about the new Covid strain that has forced numerous countries to throw up fresh travel bans.

Observers said that the reaction last week may have been overdone as there was still a lot to find out about Omicron, while the billions of people now vaccinated should offer some protection.

Meanwhile, major drugs firms have said they are already working on a jab specific to the new strain.

The slightly less negative mood helped most Asian markets higher Tuesday, with Tokyo, Shanghai, Sydney, Wellington, Taipei and Jakarta up.

However, Hong Kong was dragged down by a new round of sell-offs in the technology industry, and casinos expanded Monday’s plunge after news of the arrest of Macau’s largest gaming junket operator in charge of the gaming industry.

Seoul also fell.

Due to the alleviation of China’s power shortage, the news that Chinese factory activity rebounded more than expected last month hardly responded.

There is still a lot of uncertainty among traders. Experts say it will take weeks to know the full impact of the virus, and the World Health Organization warns that it poses a “very high” risk globally.

Federal Reserve Chairman Jerome Powell warned that the latest emergency situation has brought “downside risks to employment and economic activity, and increased inflation uncertainty.”

In a prepared comment that appeared before the Senate Banking Committee late on Tuesday, he also said that the virus may “exacerbate supply chain disruption,” which is the main reason for the surge in inflation this year.

The surge in prices this year has forced several central banks to raise interest rates or tighten the ultra-loose monetary policy implemented at the beginning of the pandemic in recent months, and analysts say this continues to play a role in investors’ minds.

“We’ll get a new variant, we’ll get new waves but the market, and we all as investors, will see how that might play out,” Jason Brady, president at Thornburg Investment Management, told Bloomberg Television.

“I’m much more interested in inflation and potentially rising rates causing some of the market leaders of 2020 and 2021 to falter a little bit more.”

On oil markets, both main contracts built on Monday’s gains but still have a long way to go to regain the losses of more than 10 percent suffered Friday on fears about demand.

Focus is now on OPEC and other key producers, which are due to decide on whether to press on with their plan to lift output each month in light of the new travel restrictions and the threat of Omicron.

Howie Lee, of Oversea-Chinese Banking Corp, said if OPEC+ “do pause, it will provide another reason for oil to find a firmer footing”.

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