FILE PHOTO: A man walks past a stock quote board at a brokerage in Tokyo, Japan February 26, 2021. REUTERS / Kim Kyung-Hoon
December 20, 2021
By Wayne Cole
SYDNEY (Reuters) – Asian stock markets fell and oil prices slid on Monday as a rise in Omicron cases sparked tighter restrictions in Europe and threatened to drag the global economy into the new year. .
The seasonal liquidity shortfall made for a rough start, and S&P 500 futures led the way with a 0.7 percent drop, while Nasdaq futures fell 0.6 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4% and Japan’s Nikkei fell 0.7%.
The spread of Omicron sent the Netherlands into lockdown on Sunday and put pressure on others to watch, although the United States appeared to remain open.
“Omicron is seen as the Grinch that stole Europe’s Christmas,” said Tapas Strickland, chief economist at NAB. “With the number of Omicron cases doubling every 1.5-3 days, the possibility of the hospital system being overwhelmed even with an effective vaccine remains.”
While coronavirus restrictions dim the outlook for economic growth, they also risk keeping inflation high and making central banks more belligerent.
Notably, Federal Reserve officials have been openly talking about raising interest rates as early as March and starting to reduce the central bank’s balance sheet by mid-2022.
That’s even more drastic than the futures implied, which has preceded a lot of the Fed’s intentions so far. The market only prices when there is a 40% chance of a price increase in March, with June remaining the favored month for price increases.
Such slurs from the Fed were the main reason longtime Treasury yields fell last week as short-terms rose. That brings the 10-year curve to its closest to flat since late 2020, reflecting a policy tightening that will lead to a recession.
BofA economists see this risk as a reason for stocks to fall, even though their latest survey of fund managers shows only 6% expect a recession next year and only 13% are underweight stocks. Most are still overweight technology with “long technology” still considered the most crowded commercial industry.
They also note that for 2021, the winners are oil with a gain of 48%, REITs with 42%, Nasdaq with 25% and banks with 21%. Losers included biotech with a 22% drop, while China also lost 22%, silver 19% and JGBs 10%.
It was the best year for commodities since 1996 and the worst for global government bonds since 1949.
Early Monday, the 10-year US bond yield fell at 1.38% and well below its 2021 high of 1.776 percent.
The Fed’s hawkish turn combined with safe-haven outflows bolstered the US dollar index near its best year of the year at 96.665, following a 0.7% gain on Friday.
The euro is weakening at $1.1241, having dropped 0.8% on Friday to threaten a year low at $1.1184. The Japanese yen took a safe-haven status and was held steady at 113.63 per dollar.
Sterling fell at $1.3228 as Omicron worries erased all gains after the Bank of England’s surprise rate hike last week.
Gold looks firmer at $1,801 an ounce, having broken a five-week losing streak last week as equities slid.
Oil prices fell amid concerns that the spread of the Omicron variant would reduce demand for the fuel and show signs of improving supply.
Brent crude fell $1.56 to $71.96 a barrel, while US crude lost $1.43 to $69.43 a barrel.
(Edited by Sam Holmes)
https://www.oann.com/asia-stocks-oil-prices-suffer-as-omicron-spreads/?utm_source=rss&utm_medium=rss&utm_campaign=asia-stocks-oil-prices-suffer-as-omicron-spreads Asian stocks, oil prices hit as Omicron spreads