Global shares were mixed Tuesday, cheered by the expected passage of the US stimulus package, although that optimism was tempered by worries about inflation and the coronavirus pandemic.
A pick-up in consumption witnessed in the December quarter — largely driven by release of pent-up demand during the festive season — has clearly not strengthened since; if anything, consumption has become weaker of late.
Global shares were mixed Tuesday, cheered by the expected passage of the US stimulus package, although that optimism was tempered by worries about inflation and the coronavirus pandemic. France’s CAC 40 was little changed, inching up less than 0.1 per cent in early trading to 5,903.07. Germany’s DAX slipped 0.3 per cent to 14,341.07, while Britain’s FTSE 100 rose nearly 0.1 per cent to 6,713.26. US shares were set for gains, with the future for the Dow industrials up 0.5 per cent at 31,939.0. The S&P 500 future rose 0.8 per cent to 3,851.00. Japan’s benchmark Nikkei 225 added nearly 1.0 per cent to 29,027.94. South Korea’s Kospi slipped 0.7 per cent to 2,976.12. Australia’s S&P/ASX 200 added 0.5 per cent to 6,771.20. Hong Kong’s Hang Seng edged up 0.8% to 28,773.23, while the Shanghai Composite slipped 1.8 per cent to 3,359.29.
Jingyi Pan, senior market strategist with IG in Singapore, said Asian markets were weighing the impact of a global recovery alongside the prospect of an accelerating climb in US bond yields. Yoshimasa Maruyama, chief market economist for SMBC Nikko Securities, said the global economic rebound is stronger than some had previously expected, and that recognition is becoming more widespread in March than in February. And this recognition of recovery in March itself will work as a source for more confidence, he said.
The vaccine rollouts in the US and Europe will also help instill confidence in future growth, he added. Revised economic data for October-December, released Tuesday, showed the Japanese economy grew at an annual pace of 11.7 per cent. That was weaker than the 12.7 per cent growth reported last month in the preliminary estimate. Quarter on quarter, the growth was 2.8 per cent, revised from 3 per cent, as public and private investment was not as strong as initially thought. Japan’s economy expanded at a 22.8 per cent pace in the July-September period. That followed a sharp contraction as the pandemic slammed tourism, trade, consumption and production.
Yields have been climbing with rising expectations for growth and the inflation that could follow. Higher yields put downward pressure on stocks generally, in part because they can steer away dollars that might have gone into the stock market into bonds instead. That makes investors less willing to pay such high prices for stocks, especially those that look the most expensive, such as technology stocks. Technology companies have been heading lower as investors start to doubt whether the huge gains they made during the pandemic months can continue if inflation surges.
Investors have been betting that USD 1.9 trillion in coming government stimulus will help lift the economy out of its coronavirus-induced malaise. There are also investors who are betting that stimulus and an improving economy will result in some inflation down the road. The US economic aid package, passed narrowly by the Senate on Saturday, provides direct payments of up to USD 1,400 for most Americans and extends emergency unemployment benefits. It’s a victory for President Joe Biden and his Democratic allies, and final congressional approval is expected this week.
Oil prices also have been rising. After plunging with the onset of the pandemic, as demand plummeted, prices have been recovering. Last week, some observers were expecting the OPEC cartel and its allies to lift more restrictions and let the oil flow more freely. But OPEC agreed to leave most restrictions in place. In energy trading, benchmark US crude for April delivery lost 23 cents to USD 64.82 a barrel. It fell USD 1.04, or 1.6 per cent to USD 65.05 a barrel on Monday, which was still up 32.8 per cent so far this year. Brent crude, the international standard, fell 16 cents to USD 68.08 a barrel.
In currency trading, the US dollar rose to 108.92 Japanese yen from 108.87 yen late Monday. The euro strengthened to USD 1.1879 from USD 1.1846.