HONG KONG (Reuters) – Asian stocks and major currencies paused on Thursday as markets struggled to find direction in the absence of solid information on the Omicron variant of the novel coronavirus, leading to divergent trading on US and European equity futures.
Remarks by Federal Reserve Chairman Jerome Powell also weighed on the minds of traders, reiterating that he would consider a faster cut to the bond buying program, which could open the door to price hikes. interest rate earlier.
With the markets betting that this would eventually contain inflation, the result was also a flattening of the US yield curve.
Euro Stoxx 50 futures fell 1.3% early in Thursday, indicating Wednesday’s 1.7% gain on EUROSTOXX, its best day since May, would be reversed, and FTSE futures were down 1.13%
In contrast, S&P 500 futures rose 0.56% and Nasdaq 100 futures gained 0.49%. The two underlying indices closed more than 1% lower on Wednesday.
“All anyone can do at the moment is wait for each title as it comes out, because there are a series of outstanding questions about the new variant that remain in full force.” left unanswered and will remain so for days or weeks, ”said Kyle Rodda, analyst. in the IG Melbourne brokerage markets.
He added that with the Fed’s reduction in stimulus and rate hike readiness, markets were no longer using “bad development as another excuse to buy stocks while waiting for an increase in Fed liquidity. “.
Much remains unknown about the new variant, which was first discovered on November 8 in South Africa and has spread to at least two dozen countries.
South Korea on Thursday suspended quarantine exemptions for fully vaccinated inbound travelers for two weeks, while Japan’s central bank warned of economic pain as countries respond with tighter restrictions.
In Asia, the largest MSCI index of Asia-Pacific stocks excluding Japan rose 0.35%, supported by a 1.21% rise in Korea’s KOSPI following a mini tech rally, while the Japanese Nikkei lost 0.27%.
Chinese real estate companies in Hong Kong and mainland markets have won on learning that three Chinese developers are looking to raise a total of 18 billion yuan ($ 2.83 billion) by selling onshore bonds, a sign that Beijing is easing slightly liquidity strains on the cash-strapped sector.
The second day of Powell’s testimony to Congress also caught the attention of investors, in which he said the Fed must be prepared to respond to the possibility that inflation may not decline in the second half of next year. .
“We now expect (the Fed’s steering committee) to complete asset purchases in April 2022 and start raising the funds rate in June 2022,” CBA analysts said in a morning note.
Investors seemed to think this would mean rates would end up peaking at a lower level, and so turned to long-term Treasuries, sending the 30-year bond yield to its lowest level since early January in January. the end of American hours Wednesday.
Benchmark 10-year yields fell to 1.404% – a nine-week low – and were last at 1.4426%
The dollar index remained stable, although the greenback rose nearly 0.3% to 113.07 yen, regaining some of its recent losses, thanks to Powell’s hawkish tone.
Oil prices have also rebounded, albeit after falling sharply in recent days amid fears the new variant might hit travel.
Brent crude futures gained 0.8% to $ 69.45 per barrel, and US crude futures gained 0.93% to $ 66.18 per barrel, though still in sight from Tuesday’s three-month low.
Spot gold slipped 0.38% to $ 1,776 an ounce.