Asia markets fall on Omicron, Fed tapering worries

Asian markets swing as traders keep worried eye on inflation

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Hong Kong: Asian stock markets fluctuated on Monday after the recent rally. Investors were unable to keep up with another healthy performance on Wall Street. Inflation continued to suppress market sentiment.

Although optimism about the global economic recovery still exists, the price increase that has not been seen in decades has made traders increasingly worried that central banks will have to tighten monetary policies faster and more severely than previously thought.

And data out of the United States last week showing consumer sentiment at a 10-year low indicated that the issue is being felt more in people’s pockets, putting pressure on the Federal Reserve to step in.

However, for now officials are sticking to their view that the inflation spike will be temporary and peter out as supply chain problems are resolved.

National Australia Bank’s Ray Attrill warned US President Joe Biden — who is seeing his popularity taking a hit because of the issue — could suffer.

“If consumer confidence, and (real) spending is seen to be suffering under the weight of six percent consumer price inflation, then it suddenly becomes a political problem for the White House, not just a headache for the Fed,” he said in a note.

Despite this, the three major Wall Street indexes closed with a strong momentum last week, regaining the sharp declines suffered on Tuesday and Wednesday due to higher-than-expected U.S. inflation.

In Asian morning trading, most markets are rising, but oscillating between gains and losses.

After data showed that the economy contracted more than expected in the third quarter, Tokyo performed strongly, triggering hopes that the government will launch a large-scale stimulus plan to promote recovery.

Hong Kong, Sydney, Seoul, Wellington and Taipei all rose slightly, but Shanghai, Singapore, Manila and Jakarta fell slightly.

There was little initial reaction to the data showing that China’s retail sales growth in October far exceeded expectations, and traders were worried that economic growth would slow due to the lockdown measures implemented to combat the new virus outbreak.

Weakness is a headache for the country’s central bank because it must work hard to promote economic recovery while trying to control inflation, which is at its lowest level since the mid-1990s.

At the same time, traders will pay close attention to the virtual meeting planned by Biden and Chinese President Xi Jinping on Monday night, US time.

The virtual meeting of the presidents comes against a backdrop of rising tensions over several issues including Taiwan, trade, human rights and Hong Kong.

Trading on a new Chinese stock exchange focused on small and medium companies began in Beijing, with investors able to buy and sell more than 80 firms.

The move follows the 2019 launch of a Nasdaq-style board focused on science and technology listings on the Shanghai Stock Exchange.

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