Market news

20 December 2021

Asian Stock Market: PBOC, Australia fail to recall bulls amid Omicron fears

  • Asia-Pacific shares print losses despite PBOC’s surprise rate cut, Australia’s vaccine optimism.
  • Omicron woes join US stimulus chatters, Fed rate-hike concerns to weigh on the sentiment.
  • Light calendar keeps risk catalysts in the spotlight.

Asian markets portray risk-off mood during early Monday morning in Asia as covid fears join disappointment over US stimulus and Fed rate hike concerns. In doing so, investors reject cheering a surprise rate cut by the People’s Bank of China (PBOC) and Australia’s optimism to defeat the coronavirus with its 90% vaccination rate.

To portray the mood, MSCI’s index of Asia ex-Japan shares drops 1.60% whereas Japan’s Nikkei 225 marked over 2.0% of intraday losses at the latest.

Stocks in China drown Australia’s ASX 200 while NZX 50 bucks the trend with 0.90% intraday gains by the press time. Hong Kong, South Korea, Indonesia and India were all in the red as market sentiment sours.

The main risk catalysts are the fears of the South African covid variant, dubbed as Omicron, joined by the US Democrats’ disappointment over President Joe Biden’s stimulus plan and the Fed rate-hike calls.

A 52% jump in the UK’s covid cases and fears of fresh covid-linked restrictions during the Christmas celebrations join chatters over a virus-led death of a New Zealand resident who took Pfizer vaccine. Additionally, New York Times said, “Dr. Anthony S. Fauci, the nation’s top infectious disease expert, warned on Sunday that the extraordinarily contagious Omicron variant of the coronavirus was raging worldwide and that it was likely to cause another major surge in the United States, especially among the unvaccinated.”

It’s worth noting that US Senator Joe Manchin refused to vote in favor of President Biden’s Build Back Better (BBB) plan during the weekend. The news pushed back previous hopes of getting the stimulus through the house in 2021. Even so, US House Speaker Pelosi stays hopeful of reaching an agreement over BBB in 2022.

Elsewhere, Fed Board of Governors member Christopher Waller renewed the Fed rate-hike concerns on Friday while saying, per Reuters, “The ‘whole point’ of the Fed's decision to accelerate the pace of its QE taper was to make the March Fed meeting ‘live’ for a first rate hike.”

Alternatively, China’s troubled firm Kaisa tries to renew market optimism, but fails, while filing for resumption of trading of the company’s shares.

Against this backdrop, S&P 500 Futures drop 0.95% intraday whereas the US 10-year Treasury yields drop three basis points (bps) to 1.37%, down for the third consecutive day at the latest.

Moving on, a light calendar will join the year-end holiday mood to restrict the market moves. However, risk catalysts are in the driver’s seat.

Read: US Treasury yields remain pressured, S&P 500 Futures drop half a percent on sour sentiment

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