Par Swati Pandey
SYDNEY (Reuters) – Asian stocks slipped to a one-week low on Monday, and assets seen as a safe haven, including the yen and gold, edged up amid fears of rising inflation and a surge in coronavirus cases, while oil prices have fallen amid oversupply concerns.
The MSCI’s largest Asia-Pacific stock index outside of Japan fell 1.1% for a second straight day of losses to 677.45, a level not seen since July 12. The index was on track for its biggest daily percentage drop since July 8.
fell 1.3%, as did Australia’s benchmark stock index. South Korea was down 1%, while Chinese stocks also started to fall with the blue chip index down 0.6%.
Oil prices have stumbled by more than 1% after an agreement this weekend within the OPEC + producer group to revive production at a time when demand prospects are still unclear. [O/R]
Global economic growth is starting to show signs of fatigue as many countries, particularly in Asia, struggle to curb the highly contagious Delta variant of the coronavirus and have been forced into some form of lockdown. The specter of high inflation, which the market has long feared, also haunts investors.
Economists at Bank of America (NYSE 🙂 lowered their forecast for economic growth in the United States to 6.5% this year, from 7% previously, but maintained their forecast of 5.5% for next year.
“When it comes to inflation, the bad news is that it should stay high in the near term,” they said in a note, highlighting their last reading of their proprietary inflation meter which remains high.
“The good news is… we are probably near the peak, at least for the next few months, as base effects are less favorable and scarcity pressures shift from goods to services. “
US Federal Reserve Chairman Jerome Powell has repeatedly stated that any surge in inflation should be transient, indicating that monetary policy will remain favorable for some time to come.
However, the markets remain difficult to convince.
Aviva Investors, the global asset management business of Aviva plc (LON :), expect rapid growth and inflation to put upward pressure on long-term sovereign bond yields.
“As such, we prefer to be somewhat underweight in duration, primarily via US Treasuries,” said Michael Grady, head of investment strategy and chief economist at Aviva Investors. “Overall, we have a neutral view on currencies. “
Action in the currency market was stifled on Monday.
The dollar strengthened slightly against a basket of major currencies at 92.712.
Against the safe haven yen, the dollar lost 0.2% to 109.90, approaching the recent one-month low of 109.52.
The euro was broadly stable at $ 1.1801.
Risk sensitivity slipped to $ 0.7372, the lowest since last December at the start of Asian trading.
The performance of equities in recent days has stressed the nerves of investors.
MSCI’s All Country World Index, a gauge of global stocks, hit a record high last week but ended it down 0.6%. On Friday, the Dow Jones closed 0.9% lower, slipped 0.75% and the Nasdaq lost 0.8%.
The losses came despite stronger-than-expected US retail sales last week, which rose 0.6% in June, contrary to an expected decline.
Next on the investor radar are corporate earnings for the June quarter with Netflix (NASDAQ :), Philip Morris (NYSE :), Coca Cola and Intel Corp. (NASDAQ 🙂 among companies expected to release their report this week.
Bank of America analysts are forecasting an 11% rise in earnings, which they say will help rekindle investor confidence in a broader economic recovery and bring back a rotation to so-called “value” stocks. are currently trading below their true value.
Elsewhere, gold, an asset seen as a safe haven, rose with spot prices at $ 1,815.4 an ounce.
was down 90 cents to $ 72.69 a barrel. slipped 83 cents to $ 70.98 a barrel.