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Asian markets a sea of red as virus woes add to correction fears
HONG KONG, Jan 28, 2021 (BSS/AFP) – Asian markets suffered further losses
Thursday, tracking a rout in New York and Europe as markets were hit by a
perfect storm of worries about the slow rollout of vaccines, surging
infections, a stuttering economic recovery, and high valuations.
After a months-long rally sent several indexes to records or all-time
highs, investors have started to fret in recent weeks about a possible
correction and analysts say some losses are to be expected.
The Federal Reserve added to the sense of concern as it warned that the
economy was struggling in the face of the new wave of coronavirus that is
hammering the northern hemisphere, forcing governments to reimpose strict
containment measures.
The US central bank said the “pace of the recovery in economic activity
and employment has moderated in recent months” and said it would maintain its
ultra-loose monetary policy for the foreseeable future.
Chair Jerome Powell added that “overall economic activity remains below
its level before the pandemic, and the path ahead remains highly uncertain”.
While there were few surprises from the meeting and Powell’s comments,
they provided a dose of reality to investors about the state of the economy,
despite broad long-term optimism.
“Nerves about vaccine rollouts weighed on market sentiment and significant
volatility among some stocks targeted by retail investors added to investor
fluxomics,” said Axi Strategist Stephen Innes.
“Yes, the future looks bright, but the moment is hell.”
He added that hopes for the reopening of economies were “getting pushed
back well into the second quarter due to messed up vaccination and rollout
strategies”.
– Cathay plunges –
Worries about inoculations are rife, with the US and Europe struggling to
get their programmes into gear owing to supply problems.
The European Union and Britain are locked in a row over access to
AstraZeneca’s drug, with both sides insisting the company uphold contractual
delivery promises to each of them — but it has warned there is not enough to
go around.
All three main Wall Street markets ended more than two percent lower,
while London, Paris and Frankfurt were each more than one percent off.
And Asia was also a sea of red.
Tokyo, Hong Kong, Shanghai, Seoul, Singapore, Taipei were all down more
than one percent, while Sydney and Wellington lost almost two percent and
Jakarta also racked up sizeable losses.
And observers said prices would likely drop further before resuming
advances.
“Investors should monitor, but not fear, the risk of a correction,” said
Tai Hui, at JP Morgan Asset Management.
“We are still constructive on the global economic fundamentals over the
next 12-18 months, which should support equities, corporate credit and
emerging market fixed income.”
Hong Kong and Shanghai were also being squeezed by the Chinese central
bank’s decision to suck liquidity out of financial markets as it looks to
avert a bubble developing.
The move has put a brake on a massive spending spree in Hong Kong by
mainland traders looking to take advantage of relatively cheap shares in the
city.
Adding to the weakness in Hong Kong, Cathay Pacific plunged more than
eight percent after the flag-carrier unveiled an $870-million bond sale to
shore up its finances.
Investors have also been left deflated by signs that Biden’s proposed $1.9
trillion stimulus could be watered down and not even be ready until March
with progress snarled up by the Senate impeachment trial of Donald Trump.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: DOWN 1.1 percent at 28,323.06 (break)
Hong Kong – Hang Seng: DOWN 1.1 percent at 28,980.65
Shanghai – Composite: DOWN 1.1 percent at 3,535.62
Euro/dollar: DOWN at $1.2100 from $1.2115 at 2210 GMT
Dollar/yen: UP at 104.30 yen from 104.13 yen
Pound/dollar: DOWN at $1.3672 from $1.3684
Euro/pound: UP at 88.50 pence from 88.47 pence
West Texas Intermediate: DOWN 0.3 percent at $52.72 per barrel
Brent North Sea crude: DOWN 0.3 percent at $55.65 per barrel
New York – Dow: DOWN 2.1 percent at 30,303.17 (close)
London – FTSE 100: DOWN 1.3 percent at 6,567.37 (close)
BSS/AFP/FI/ 0922 hrs