Asian markets mixed as rate hike woes offset China tech hopes

Asian markets up as traders weigh recovery, eyes on US inflation


Hong Kong: The Asian market rose tentatively on Wednesday as investors assessed the impact of the rapidly spreading Delta variable and the Fed’s future financial support based on the expectation that the global economy will eventually recover from the pandemic crisis.

The news that Joe Biden’s $1.2 trillion infrastructure spending bill finally passed the Senate is encouraging, but analysts said it may take some time to pass the House of Representatives due to differences among Democrats.

Due to recent profit-taking (many markets are at record highs or multi-year highs) and concerns about China’s crackdown on industries such as technology and private tuition, the stock market is basically optimistic about the start of the week.

But the main disturbing driver is the surge of new infections from the Delta Covid mutation, which has forced many governments around the world to re-implement lockdowns and other containment measures.

Although the rate of new cases is rising in places where vaccination planning is difficult, the rate of new cases is also spreading in countries with high vaccination rates, such as Israel, the United States, and the United Kingdom.

Nonetheless, investors remain generally optimistic that the world economy will eventually get rid of this disease, even if recovery does take longer than originally hoped.

David Donabedian of CIBC Private Wealth Management said: “Obviously, people are more concerned about and worried about the Delta variant of Covid, but so far, the market has assessed it as a manageable risk. “The market is climbing the wall of worry.”

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

This is after the Dow Jones and S&P 500 indexes hit record highs.

Focusing firmly on the release of US inflation data later in the day may affect the Fed’s decision when to start scaling back its massive bond purchase program, which has been the main pillar supporting the global market since April last year.

The surge in prices in recent months and the large number of jobs created in June and July have increased the pressure on the central bank to tighten policies to prevent the economy from overheating.

As several officials have expressed their support for tightening before the end of the year, the question now is when — not whether — action will be taken to allow observers to suggest a rate hike as early as 2022.

Although Biden’s new infrastructure bill passed the Senate’s rare bipartisan pass on Tuesday, expectations for Biden’s new infrastructure bill to further provide new fiscal stimulus are not high.

The plan-including $550 billion in new spending-must now be passed in the House of Representatives before it can be signed by the President.

But the House of Representatives has stated that unless the senator also promotes a $3.5 trillion social spending package that includes tax increases, it will not pass it-Republicans and even some Democrats are unlikely to agree to this request.

“The biggest uncertainty is whether the progressives will refuse to block all infrastructure legislation if partisan budget resolutions are cut too much,” OANDA’s Edward Moya said.

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