Asian markets struggled Thursday despite another record close in New York, with investors keeping an eye on the rapidly spreading Delta virus variant, which has forced several governments to reimpose lockdowns and raised concerns about the pace of economic recovery.
The upcoming release of US jobs data is also in view, with a forecast-beating jump on private employment lifting hopes for a strong reading that will solidify optimism about growth in the world’s top economy.
While inflation is expected to continue surging over the next few months, worries that the Federal Reserve will tighten its ultra-loose monetary policy too soon or too quickly have eased, with bank officials saying they will be measured in their tapering.
Having fluctuated over the past three days, Asia equities were largely lower Thursday.
Tokyo slipped, with little reaction to the Bank of Japan’s Tankan business survey showing confidence among major manufacturers was at its highest level since 2018.
Shanghai, Sydney, Singapore, Seoul, Taipei and Mumbai fell but Wellington, Manila, Bangkok and Jakarta edged up. Hong Kong was closed for a holiday.
London, Paris and Frankfurt all rose in the first few minutes of trade.
That came after the S&P 500 clocked up its fifth straight record, to end the first half of the year more than 14 percent higher.
US traders cheered data showing private firms added 692,000 jobs in June, a big drop from the month before but well above expectations. The report added to a recent run of figures showing strong consumer confidence, rising home prices and positive corporate earnings.
The main event this week comes Friday, with the release of government non-farm payrolls, which will provide a clearer snapshot of the economic progress and could play a role in Fed deliberations on monetary policy.
Preparing for Fed taper
With an eye on this improving outlook, Dallas Fed chief Robert Kaplan said that while he hoped the winding down of its bond-buying scheme would begin “soon”, investors would be more prepared than they were in 2013, when a “taper tantrum” sent shivers through markets.
“I want it to get out into the market, and I think this debate we’re having at the (policy board), some of it publicly, is good,” he told Bloomberg TV. “People are on notice that these adjustments are coming, the only question is when.”
And Atlanta Fed boss Raphael Bostic said economic growth had “actually fully recovered” but the taming of unemployment that is a key target for the bank would take some time.
While the global rebound continues to pick up, there is a growing concern that the spread of the Delta variant could hobble it.
The virus is seeing sharp spikes across the world, with Australia shutting down four major cities and numerous countries imposing tough restrictions including South Africa, parts of Asia, South America and Europe.
“What we’re seeing at the moment is markets coming to the realisation that they have to discount the risk — the high probability I really should say — that the Covid-19 virus will be with us for the foreseeable future,” Kyle Rodda, an analyst at IG Markets, said.
Oil prices extended Wednesday’s rally as OPEC and other major producers prepare for their monthly meeting later in the day at which they are expected to lift output as demand rides on the back of the economic recovery.
Both main contracts are sitting around multi-year highs in the mid-$70 range and some observers are forecasting a break above $80, with even $100 being tipped.
Key figures at 0720 GMT
Tokyo – Nikkei 225: DOWN 0.3 percent at 28,707.04 (close)
Shanghai – Composite: DOWN 0.1 percent at 3,588.78 (close)
Hong Kong – Hang Seng Index: Closed for a holiday
London – FTSE 100: UP 0.7 percent at 7,086.53 (close)
Euro/dollar: DOWN at $1.1856 from $1.1859 at 2050 GMT
Pound/dollar: DOWN at $1.3828 from $1.3832
Euro/pound: UP at 85.76 pence from 85.72 pence
Dollar/yen: UP at 111.24 yen from 111.11 yen
West Texas Intermediate: UP 0.5 percent at $73.83 per barrel
Brent North Sea crude: UP 0.4 percent at $74.93 per barrel
New York – Dow: UP 0.6 percent at 34,502.51 (close)