HONG KONG, Feb 22, 2021 (BSS/AFP) – Markets were mixed Monday as investors
struggled to maintain an initial rally, with falling infection rates and more
good news on the vaccine front playing off against worries about high
valuations and inflation.
While the United States is approaching 500,000 deaths, there is growing
optimism that there is light at the end of the tunnel in the Covid-19 crisis
as governments embark on immunisation programmes that will allow economies to
reopen.
Expectations that President Joe Biden’s vast stimulus will be passed next
month are also keeping spirits up, as a raft of data last week on factory and
services activity indicated the financial hit to the United States and Europe
might not be as bad as feared.
News that the Pfizer/BioNTech jab appeared to prevent nine in 10 people
from getting the disease in Israel — which is the most advanced in its
rollout — provided a positive background. Israeli officials also said the
shot was 99 percent effective at preventing deaths from the disease.
Meanwhile, hopes for a wider distribution were given a lift after Pfizer
said its drug could be stored in normal medical freezers instead of the
ultra-cold conditions initially thought necessary.
Tokyo, Hong Kong, Singapore, Taipei and Jakarta rose but Shanghai, Sydney,
Seoul, Wellington and Manila were all in the red.
The rally that has characterised the past few months looks to be wobbling
as traders fret that prices may have become a little too frothy.
There is growing concern that the expected recovery and Biden’s spending
package will fire a surge in inflation that could force the Federal Reserve
to wind back the loose monetary policies and record-low interest rates that
have been a key pillar of a near-year-long market surge.
– Sterling holds dollar gains –
“The Biden administration continues to stay on message stressing Congress’s
need to pass a significant fiscal package, downplaying recent more robust
economic data as… a package exceeding $1.9 trillion heads for a House vote
this week,” said Axi strategist Stephen Innes.
“The unprecedented and highly stimulatory policy is an attempt to exceed
one million jobs a month from April to September.
“But timing is everything. The next leg of the reflation will have to be
carried more and more by a continued recovery in economic growth, as fiscal
and monetary stimulus gets increasingly packed into the price, and all the
while this will bring the Fed closer to acknowledge that policy normalisation
is coming.”
And Simon Ballard at First Abu Dhabi Bank warned that more big gains in
stocks are “going to create increasing levels of concern”.
He added: “It’s driven by, on one side, stimulus expectations from Mr Biden
and also the expectation of that continued dovish rhetoric and more
acceptance of early stages of inflation from the Fed before even thinking of
moving to a tightening bias.”
Investors are keeping tabs on China-US relations after Biden called on
European allies to stand up to political and economic challenges from
Beijing, adding: “We can push back against the Chinese government’s economic
abuses and coercion that undercut the foundations of the international
economic system.”
On currency markets, the pound held gains above $1.40 — its highest levels
since April 2018 — as the British government’s vaccine drive continued to
progress well and as Prime Minister Boris Johnson laid out a plan for easing
an economically painful lockdown thanks to a sharp drop in infections and
deaths.
Bitcoin eased to $57,150, having hit another record high of $58,350 over
the weekend, and having passed $1 trillion in market capitalisation.
And oil prices bounced after being sold at the end of last week on profit-
taking — having hit a 13-month high — and as US energy firms slowly
restarted operations in Texas that had been hammered by a severe cold snap.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 0.8 percent at 30,250.83 (break)
Hong Kong – Hang Seng: UP 0.3 percent at 30,741.05
Shanghai – Composite: DOWN 0.1 percent at 3,693.86
Pound/dollar: UP at $1.4017 from $1.4004 at 2130 GMT on Friday
Euro/dollar: UP at $1.2118 from $1.2114
Euro/pound: DOWN at 86.45 pence from 86.48 pence
Dollar/yen: UP at 105.64 yen from 105.46 yen
Brent North Sea crude: UP 1.0 percent at $63.51 per barrel
West Texas Intermediate: UP 0.9 percent at $59.79 per barrel
New York – Dow: FLAT at 31,494.32 (close)
London – FTSE 100: UP 0.1 percent at 6,624.02 (close)