Nikkei drops 2% as Asian markets retreat amid concerns over omicron and Fed policy tightening

BEIJING – Asian stock markets followed Wall Street lower on Monday amid concerns over the latest variant of the coronavirus and the Federal Reserve’s stricter policy.

The Shanghai SHCOMP Composite Index,
-1.07%
fell 0.8% and the Nikkei 225 NIK,
-2.13%
in Tokyo fell 2.1%. The Hang Seng HSI,
-2.05%
in Hong Kong fell 1.4%.

The Kospi 180721,
-1.81%
in Seoul fell 1.7% and Sydney’s S & P / ASX 200 XJO,
-0.16%
lost 0.3%. Singapore STI benchmarks,
-1.12%,
Taiwan Y9999,
-0.81%
and Indonesia JAKIDX,
-0.87%
moved back.

Wall Street fell on Friday as traders pulled money off the table after the Fed said it would fight inflation by speeding up the withdrawal of economic stimulus.

The spread of the omicron variant has fueled fears that new restrictions on business and travel could worsen supply chain disruptions and spur inflation.

“Omicron threatens to be the Grinch to steal Christmas,” Mizuho Bank’s Vishnu Varathan said in a report. “The jury is out, which fits with a market that prefers security to unpleasant surprises.”

The US government on Sunday warned of a possible wave of “revolutionary infections” due to Americans traveling for the Christmas and New Year holidays.

Stocks rallied briefly, then fell last week after Fed officials said they were ready to accelerate the withdrawal of stimulus that boosted financial markets.

Also potentially weighing on sentiment, a US senator said on Sunday he would not support President Joe Biden’s $ 2 trillion infrastructure, social spending and climate plan. Joe Manchin’s announcement may doom the plan’s chances in the equally divided Senate.

On Friday, Wall Street’s benchmark S&P 500 SPX,
-1.03%
fell 1% to 4,620.64, making their third week losing out of the last four. The index is 2% below its all-time high and up 23% for the year.

The Dow Jones Industrial Average DJIA,
-1.48%
fell 1.5% to 35,365.44. The Nasdaq COMP,
-0.07%,
dominated by technology stocks, slipped 0.1% to 15,169.68.

Fed officials said on Wednesday it could speed up curtailment of bond purchases that inject money into financial markets and keep interest rates low. This sets the stage for the Fed to start raising rates next year.

Inflation has been a growing concern throughout 2021. Higher raw material costs and supply chain issues have increased overall costs for businesses, which have raised commodity prices to offset the impact. .

Consumers have so far absorbed these price increases, but they face persistent upward price pressure and this could eventually lead to lower spending. Any decline in spending could then dampen economic growth.

On the energy markets, the American benchmark CLF22 crude,
-3.68%
lost $ 1.76 to $ 68.96 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell from $ 1.52 on Friday to $ 70.86. Brent crude BRNG22,
-2.88%,
the basis of international oil prices, fell from $ 1.69 per barrel to $ 71.83 in London. It lost $ 1.50 the previous session to $ 73.52 a barrel.

The dollar USDJPY,
-0.26%
fell to 113.54 yen from 113.70 yen on Friday.


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