© Reuters. PHOTOGRAPHY: A man walks past a stock quote at a brokerage house in Tokyo, Japan, February 26, 2021. REUTERS / Kim Kyung-Hoon
By Wayne Cole
SYDNEY (Reuters) – Asian stock markets fell on Monday and oil prices fell as a growing number of Omicron COVID-19 cases triggered tougher measures in Europe and threatened to flood the global economy into the New Year.
Beijing brightened the mood a bit by lowering one-year frost loans to 20 months, although some had hoped for easing and five-year rates.
Chinese blue chips continued to fall 0.4%, while MSCI’s Asia-Pacific stock index outside Japan fell 0.8%. 1.7% fell and South Korean shares 1.2%.
lost 0.8% and Nasdaq futures nearly 1%. EUROSTOXX 50 terms lost 1.1% and terms lost 1.0%.
The expansion of Omicron led to the Netherlands entering a blockade on Sunday and putting pressure on others to follow, although it seemed the United States would remain open.
“Omicron should be the Grinch who stole European Christmas,” said Tapas Strickland, director of economics at NAB. “As Omicron cases double every 1.5-3 days, the possibility remains that hospital systems will be overloaded with even effective vaccines.”
Although restrictions on coronavirus are blurring economic growth prospects, they also risk keeping inflation high and central banks becoming even more hawkish.
It is noteworthy that Federal Reserve officials spoke openly about the increase in rates as early as March and the beginning of the decline in the balance sheet of the central bank in mid-2022.
This is even more drastic than implied by the future, which has so far been well ahead of the Fed’s intentions. The market has only a 40% chance of a price increase in March, and June is still a favorite month to take off.
Such hawkish chatter of the Fed is the main reason why long-term yields on treasury bonds fell last week while short-term yields rose. This has left the two- to 10-year curve close to the flattest since the end of 2020, reflecting the risk that tighter policies will lead to a recession.
BofA economists see this risk as a reason for the bearish attitude towards stocks, although their latest survey among fund managers showed that only 6% expect a recession next year, and only 13% have less weight on stocks. Most are still overweight in terms of technology, and “long technology” is still considered the busiest trade.
They also noted that for 2021, the winners were oil with a gain of 48%, REITs with 42%, Nasdaq with 25% and banks with a gain of 21%. The losers included biotechnology 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, yields on U.S. 10-year bonds fell 1.38% and well below the 2021 peak of 1.776%.
The Fed’s hawk turn, combined with safe haven flows, supported close to this year’s best at 96,674, after a 0.7% jump on Friday.
The euro fell to $ 1.1237, falling 0.8 percent on Friday to threaten the lowest values for the year at $ 1.1184. The Japanese yen has its own safe haven status and is stable at 113.49 per dollar.
Sterling fell to $ 1.3224 as Omicron’s worries wiped out all gains made after the Bank of England’s sudden rate hike last week.
Gold looked firmer at $ 1,801 an ounce after breaking a five-week streak last week after stocks slipped.
Oil prices have fallen amid concerns that expanding the Omicron variant would reduce fuel demand and signs of improved supply. [O/R]
it fell $ 1.66 to $ 71.86 per barrel, while it lost $ 1.44 to $ 69.42 per barrel.